Governor Haley Barbour today announced a
federal agency has given the green light to an administrative solution
for funding the Mississippi Medicaid program that is consistent with
current state and federal law and can be implemented without legislative
action.

The new solution means funds cut from reimbursement payments to
hospitals will be replaced in like amount by distributions from a
different Medicaid program, resulting in approximately $370 million
being paid to hospitals to make up for cuts required by state law.

The solution will protect the program by generating $88 million of the
$90 million shortfall in the state Medicaid share through increasing the
current gross revenue assessment (GRA) on hospitals. The other $2
million will be generated through cuts of less than 1 percent on other
provider services.

The new plan does not eliminate the requirement for cuts in Medicaid
expenditures. However, the federal government will replace virtually all
of the cuts through an existing Medicaid program called UPL, or upper
payment limit. Current state law allows the state share of the funding
for UPL to be collected through the existing gross revenue assessment on
hospitals.

As preliminarily approved by the federal Center for Medicare and
Medicaid Services (CMS) the solution will not cost the state or federal
governments any extra money, and can be implemented September 1, 2008.

“Medicaid requires a fair, permanent, sustainable funding solution,
but the legislature hasn’t enacted one. The Senate passed a fair,
permanent, sustainable solution in May but the House has failed to do
so. The solution I am announcing today is a fair, permanent, sustainable
way to fully fund Medicaid,” Governor Barbour said.

“We have been working with CMS throughout this process but it was not
until a detailed analysis could be made in light of Judge Singletary’s
July 10 ruling that we could seek approval of this solution,” Governor
Barbour said. He was referring to a recent ruling by Hinds County
Chancellor William Singletary confirming Medicaid’s statutory
authority to adjust the gross revenue assessment to draw down the
maximum UPL payment available from the federal government.

“For more than 15 years hospital and nursing home provider fees have
played a significant role in Medicaid’s overall funding methodology,
and today such fees account for about 30 percent of Mississippi
Medicaid’s funding. The plan I am announcing today uses the benefits
of those fees to attract the maximum federal match to state Medicaid
dollars,” Governor Barbour said.

“I’m very proud of the leaders and staff of the Mississippi
Division of Medicaid for the outstanding work they did in developing
this solution,” Governor Barbour said. “I’m grateful to the staff
at CMS for recognizing this is the right remedy to resolve this issue in
a way that meets all federal requirements and does not cost federal
taxpayers any extra money.”

While details of the solution are highly technical in nature, the basic
concept and underlying facts include the following:

In 2001, Mississippi’s Legislature passed a law (Miss. Code Ann.
§43-13-117 (18) (b)) establishing a gross revenue assessment (GRA) to
fund the state share for UPL.

That law allows the Division of Medicaid (DOM) to adjust the
amount/percentage of the GRA as necessary to draw down the federal share
of UPL to which Mississippi hospitals are entitled. Recently, a state
court confirmed DOM’s right to adjust the GRA percentage up or down as
necessary to draw down the federal share of UPL available to Mississippi
hospitals, without further legislative action.

State law requires the Governor to make cuts in planned Medicaid
spending to prevent a deficit, and this year’s Medicaid budget faced a
$375 million deficit.

Governor Barbour’s new plan will lower inpatient hospital
reimbursement rates by $370 million, an amount nearly equal to the
mandated cuts, and then replace the reimbursements with $370 million of
UPL distributions.

Hospitals will pay $88 million of the state share shortfall through
the gross revenue assessment and will receive $370 million through UPL
payments.

Hospitals will be paying the same amount in provider fees that they
have historically contributed as part of the state’s share of the
Medicaid program.

This solution prevents the catastrophe that would have resulted from
severe cuts that could not be replaced with other funds, and does so at
no extra cost to federal or state budgets, or Mississippi taxpayers.

Governor Haley Barbour Press Release
8/1/8