An HHS appeals board ruling in favor of programs in five states offering grants and tax credits to nursing home residents is not a signal for any state to institute similar programs, a lawyer involved in the case said last week.
The board's decision meant that the five states-Hawaii, Illinois, Louisiana, Maine and Tennessee-don't have to repay the CMS a total of $981.9 million that they received in extra federal Medicaid matching funds over a 10-year period.
The CMS argued that the states increased matching funds by charging residents a tax that was then returned in the form of grants or tax credits to private-pay residents. Agency officials argued that those arrangements constituted a kind of rebate program that violated the hold-harmless provision of Medicaid law. However, the board's ruling said the CMS didn't prove that the grants and tax credits for patients were directly related to taxes on providers.
The CMS "has never even clearly articulated how the states' programs contravene the intent of the law," according to the ruling. The ruling also stated that the CMS didn't give appropriate guidance on using tax credit or grant programs.
The Bush administration has targeted a variety of state maneuvers that increase federal Medicaid matching funds (April 18, p. 10).
Robert Lundman, a lawyer with the firm Covington & Burling that represented the states, said states still need to "proceed with caution" when starting such programs because they will be scrutinized by the CMS.
"There may be a way to do it, but it's not a green light," Lundman said. "We don't think it's an endorsement."
All five of the states have stopped the programs and didn't say if they plan to reinstitute them. Tennessee had the longest running program, in place from October 1992 to March 2001, and the CMS was requesting that the state pay back $552.6 million.
The appeals board decision ends a dispute that started in December 1994 when the CMS questioned the states about the programs. In January 2001, the agency called for repayment or reductions of future funds.
The CMS and the states failed to negotiate a settlement before the case went before the HHS review board.
