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Feds say they're not quite ready to approve governor's LIP plan

The federal Centers for Medicare and Medicaid Services said Friday that it has not signed off on the proposal by Gov. Rick Scott to rely on local governments and safety net hospitals to draw down money for the uninsured and raised concerns about the impact of the change on communities -- like Miami -- that provide the bulk of the funding for the Low Income Pool.

"CMS continues to be engaged with Florida regarding the state's LIP proposal and the May 26 letter but has not communicated approval,'' said Ben Wakana, press secretary for the U.S. Department of Health and Human Services said in response to a question by the Herald/Times. "CMS is reviewing the proposal and public comments, and working to understand the implications of the letter as well as the viability and sustainability of the proposed funding mechanism."

Under the governor's plan, announced by the Agency for Health Care Administration in a letter to the federal government on Wednesday, the state would offset the loss of $1 billion into the Low Income Pool by relying on local hospitals and local governments to raise $900 million in financing to draw down $1.2 billion in federal funds. The financing arrangements are known as intergovernmental transfers. 

As a return on their investment, hospitals would be rewarded a 10 percent profit -- a cost to the program of about $100 million. The state would then use the $1 billion promised by the federal government in Low Income Pool funding to reimburse teaching hospitals and increase patient reimbursement rates.

But instead of sending the money to the hospitals, the funds would follow the patient under the state's Medicaid managed care program through increased reimbursement rates.

The governor's office calculates that will result in a net loss of $214 million in revenue for all hospitals but, according to the Florida Safety Net Hospital Association, the revenue loss to the hospitals that provide the bulk of the charity care would be closer to $301 million in the first year and higher the following year when the federal funds decline even more.

The Safety Net hospitals say that while their institutions would face steep losses under the governor's proposal, many for-profit hospitals that avoid providing health care to the uninsured would see revenue increases.

At Jackson Memorial Hospital, for example, Miami Dade County would put up $320 million of its tax money to draw down $490 million in federal matching funds -- based on the 40/60 formula -- and receive only $100 million in return. 

According to sources who have spoken with CMS, the agency has raised questions about what impact this new formula would have on local hospitals and communities that provide the bulk of the care for the uninsured. They also question what it will mean for 2016-17 budget year, when CMS will reduce the state's LIP funding to $600 million. Sources said that any approval of a Florida LIP funding model must be viable beyond this budget cycle before CMS signs off on transitional funding for 2015-16.