Montana's nursing homes stand to lose the most in the state - some $16 million annually - if the federal government curbs a creative, but legal, financing scheme that lets states shift costs onto the federal government.
County health officials say Bush's plan to close the Medicaid loophole could force them to close the doors on some of Montana's 94 nursing homes.
Seventeen people live at the Dahl Memorial nursing home in southeastern Carter County, population 1,500. Merred said he used the $60,000 his institution got from these transfers last year to fund pay increases for staff and to pay off debts owed to suppliers.
Montana is expected to leverage approximately $19 million in additional federal money for its $586 million Medicaid program through these loopholes this fiscal year. The loophole allows states to inject county money into their Medicaid budgets, which brings in more federal Medicaid dollars. The federal government matches every $1 this state spends on Medicaid with another $3 of its own.
In Montana, counties get all their money back plus some - if not all - of the additional federal dollars.
"Intergovernmental transfers are legal mechanisms, much like tax loopholes individuals use," said Joy Johnson Wilson, health policy director for the National Conference of State Legislatures in Washington D.C. "If it's legal, we can't oppose our members making the best use of their state taxpayers' dollars."
Some federal officials say the scheme is ripe for fraud.
"Michigan built a football stadium with Medicaid dollars," said Congressman Denny Rehberg, R-Mont.
And other states have funneled their additional federal dollars out of Medicaid programs and into highways and other programs unrelated to Medicaid, he added.
"This would be abuse," Rehberg said. "If the money is set aside for Medicaid to help the poor receive health coverage, these things drive you crazy."
State Medicaid director John Chappuis said Montana has never moved its additional Medicaid money out of the program. And he said the Bush plan to curtail the transfers could "certainly have a negative effect."
"If they take away our ability to do this, it's going to mean the county or the private payers are going to have to make up the loss," Chappuis said.
Seven county hospitals also rely on money funneled through this Medicaid loophole. While the state's nursing homes will bring in an additional $16 million in federal funds this year, the seven county hospitals will leverage about $2.1 million and mental health organizations will bring in another $1.3 million.
No one yet knows how the Bush administration plans to close the loophole. President Bush merely inserted the idea into his $2.4 trillion budget for fiscal year 2005.
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