Hospitals in at least 35 states will be allowed to keep up to $2 billion in extra Medicare payments they received for treating poor people because HCFA has stopped trying to recover the money.
New York hospitals will be the big winners in the Clinton administration's decision to stop seeking the recoupment of overpayments made through Medicare disproportionate-share hospital payments, or DSH.
Medicare was estimated to have overpaid $1 billion to 130 New York hospitals over six years because the facilities incorrectly counted the number of Medicaid patients they had treated.
The timing of the Clinton administration's decision to call off its recovery has raised questions about whether the decision was aimed to help first lady Hillary Rodham Clinton's campaign for the Senate (See editorial, p. 42).
The administration announced the decision Oct. 15, the day after Hillary Clinton addressed 400 hospital executives at an annual meeting of the Healthcare Association of New York State. In that speech, she called for the DSH recoupment effort to be fixed "in a way that does not penalize hospitals that provide care to the indigent."
Representatives from Clinton's Senate campaign exploratory committee and the National Republican Senatorial Committee, which would be fielding candidates to oppose Clinton, did not return calls seeking comment about the timing of the announcement.
DSH payments subsidize hospitals that treat a high proportion of poor patients. They are calculated based on Medicaid beneficiaries' share of total patient days and the share of total Medicare days that can be attributed to Medicare beneficiaries who are eligible for Supplemental Security Income.
SSI is a federal program that provides income support for low-income elderly and disabled people.
When calculating Medicaid days, many states reported days covered by non-Medicaid medical assistance programs. HCFA contended that the practice overstates Medicaid days and causes DSH payments to be unfairly high.
HCFA has been investigating the overpayments but has concluded its instructions were unclear about which patient days should have been used in calculating DSH payments. Hospitals in at least 35 states had lumped patient days related to Medicaid beneficiaries with those for enrollees in non-Medicaid medical assistance programs.
HCFA spokesman Chris Peacock called it "justifiable confusion. It's a complicated formula," he said. "It's clear the guidance is insufficient."
In the future, however, HCFA will not allow patient days for enrollees in non-Medicaid medical assistance programs to be counted in DSH calculations.
HCFA believed significant overpayments were also made in Hawaii, Kansas, Massachusetts, Minnesota, New Jersey, Pennsylvania and Tennessee.