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August 8, 2006




On Medicaid Funding


Over the past several months my office and the Division of Medicaid have been working actively with hospitals across the state and the Mississippi Hospital Association to explore alternatives for replacing $90 million for the Medicaid Disproportionate Share Hospital program (DSH) previously funded under a system disallowed by the federal government.


We have been exploring these alternatives because it is not acceptable to cut the Medicaid state match for hospital reimbursements by $90 million. Such a cut would result in the loss of more than $360 million in Medicaid funding for hospitals.


After consulting with legislative leaders in this area, I proposed a plan that would cut the total amount of money hospitals pay to help finance the Medicaid program. Previously, the hospitals paid $90 million; my plan would reduce this to $45 million. Under the old system, only 24 public hospitals paid the $90 million. Under my plan, the burden would be spread to all 99 public and private hospitals, though the total amount paid would be cut in half. My proposal called for the other $45 million to be paid from the General Fund.


This proposal would provide significant financial relief to almost all of our small, county-owned public hospitals and to the University Medical Center. By including private hospitals in the DSH program and increasing hospital reimbursement rates as planned on January 1, 2007, there would be no negative aggregate impact on the private hospitals as a whole, although each individual private hospital’s situation would be different.


When I proposed this plan I said I would remain open to other viable alternatives. Since then, the Division of Medicaid has continued to work with hospitals throughout the state and the Mississippi Hospital Association to develop other possible alternatives. Today, I informed the leadership of the hospital association that the Division of Medicaid will submit the alternative developed by the hospital association to the Centers for Medicare and Medicaid Services (CMS) for its approval or disapproval.


If CMS approves the alternative we will implement it and not go forward with the proposal the Division of Medicaid put forward earlier. If not, we will continue with the plan that reduces the total assessment by $45 million while spreading the responsibility to both private and public hospitals. Both plans would require an additional $45 million from the General Fund for Medicaid.


The federal government is requiring us to change our system. I have said before I would not have changed the system but for the federal government’s mandate. Therefore, if CMS will accept this compromise proposal, we will go forward with it.