April 12, 2005

TennCare Scamming Uncle Sam?

Has Tennessee been ripping off Uncle Sam to fund TennCare? It looks that way.

The Bush administration yesterday named 15 states, including Tennessee, that it said had used improper accounting techniques to obtain excessive amounts of federal Medicaid money.

Federal officials contend that the 15 states have been ''recycling'' federal money, rather than using state and local tax revenue to pay their full share of the costs of Medicaid, which provides health insurance to more than 50 million low-income people.

In a typical arrangement, they said, the state makes an inflated payment to a county or municipal hospital or nursing home, far exceeding the cost of care for a Medicaid patient. The county or city is required to return a large share of the money to the state, which uses it to draw down more federal Medicaid money or to help pay for other state programs.

These arrangements create the illusion that a state is spending much more on Medicaid than it actually does, the federal officials said. That, in turn, allows the state to obtain more federal money than it should, they said.

In 1992, before Sundquist was elected, Tennessee levied a $2,600-per-bed tax on nursing homes, raising about $100 million a year. The state encouraged nursing homes to raise rates to cover the tax and used the money raised by the tax to attract about $65 million worth of federal matching funds. It gave grants of up to $2,372.50 to low-income nursing-home residents ineligible for Medicaid. The "Granny Grants" helped about 3,800 people pay for nursing home care — while raising rates for the rest of Tennessee’s 36,000 or so nursing-home residents.

More than 70 percent of Tennessee’s nursing home residents have their bills paid by Medicaid. Uncle Sam paid much of the nursing home tax, and then Tennessee used that revenue to draw down matching federal dollars in a clever bit of double-dipping the Health Care Financing Administration wants stopped.

The $100 million raised from the bed tax went into the state’s general fund. Health services like TennCare represent only a third of general fund spending, so the net effect of the tax is to tax nursing-home residents and to have Uncle Sam pay for things like parks, prisons and state troopers, general government bureaucracy and schools.

Last year, the administration and legislature raised the bed tax to $3,250. This year, they reduced the tax to $2,225, which will bring in almost $88 million from Tennessee’s nearly 40,000 licensed nursing-home beds.

In September 1999, HCFA informed the state the tax violated a 1991 law that prohibits states from imposing taxes on health care providers and returning all or a portion of the tax directly or indirectly to the taxpaying entity.

"There was some correspondence back as early as 1994 where they said this is kind of fishy," State Comptroller John Morgan confessed in early 1999 to the TennCare Oversight Committee, "but then it went away for a while."

I don't know yet if the latest accusation regarding illegal financing schemes involves the Sundquits-era Granny Grants scam or some other method by which the current governor's administration is scamming Uncle Sam. I'll try to find out and let you know.

UPDATE: The graphic accompanying the New York Times story indicates Tennessee's scamming involves Medicaid money for both in-patient care and nursing home care. Does the latter refer to Granny Grants or another "creative accounting" scheme? Is the current administration of Gov. Phil Bredesen also involved? And what is it likely to cost Tennessee taxpayers? I'll try to find out and let you now.

UPDATE 2: I have requested - and have been assured that I will be provided - copies of all correspondence between the state and federal government regarding this issue. I'll keep you posted.