Under pressure from Alabama politicians, HCFA has reversed its decision to withhold $94 million in federal Medicaid matching funds in a dispute over the state's inpatient prepaid health plan.
The federal cutbacks would have cost hospitals in Alabama nearly $19 million and nursing homes about $29 million.
After meeting with state Medicaid officials and congressional representatives, HCFA agreed to release the money for fiscal 1996, ending Sept. 30.
"We can avert the immediate crisis and continue to work with HCFA on long-term resolution of this issue," said Gwen Williams, state Medicaid commissioner. State officials continue to threaten a lawsuit if HCFA doesn't ultimately comply with its original approval of the program and agreement to fund it.
In an attempt to convert its Medicaid system into a managed-care program, Alabama created eight prepaid health plans last year to pay hospitals for inpatient care on a regional basis. Each plan is a for-profit corporation owned by the hospitals within those districts.
HCFA, however, objects to the formula the state uses to calculate the amount of money each plan receives, primarily the amount of money each hospital is reimbursed for uncompensated care, said Leigh Jones, a state Medicaid spokeswoman.
In July, state officials announced a 12% cut, or $246 million, in its $2 billion Medicaid program to offset federal funding reductions.
"We are very happy with this settlement," said Rosemary Blackmon, a spokeswoman for the Alabama Hospital Association. "We hope to reach a final agreement with HCFA sometime in the future."