Politics & Government

Hospitals group sues to block Medicaid changes

WASHINGTON — A hospitals coalition sued in federal court Tuesday to stop changes in Medicaid financing that are intended to save billions in federal spending but that public hospitals say will lead to longer lines and reduced services for the poor and uninsured.

In December, 30 governors joined in asking congressional leaders to extend a moratorium on the rules changes that's set to expire in May.

"The consequence for public hospitals that provide lifesaving trauma care and treat the most vulnerable Americans would be devastating," Larry S. Cage, the president of the National Association of Public Hospitals, said in a statement on the lawsuit.

The suit, filed in the U.S. District Court for the District of Columbia, is aimed at a rule change that stops states from boosting Medicaid receipts above actual costs by adjusting the way in which they submit reimbursement claims. Hospitals maintain that what they're doing makes it possible for them to provide services to more patients who have no other place to go.

The rule was unveiled last May. But before its release, 29 states already had changed their practices and given back what congressional auditors had termed inappropriate proceeds from "creative financing," the Government Accountability Office said in November.

The Centers for Medicare and Medicaid Services added the rule to a half-dozen others that together will trim Medicaid spending by billions more a year. Congress put a six-month moratorium on the rules package in December.

The lawsuit focuses on the cost-based limit on Medicaid reimbursements, which the Centers for Medicare and Medicaid Services estimated would save about $5.7 billion over five years. But the House Oversight and Government Reform Committee reported in December that the impact would be far higher.

California would be one of the hardest-hit states if the rule is allowed to take effect. According to a recent congressional study, the state could lose nearly $1 billion a year over the next five years. Other states that would lose big are North Carolina and Texas, which would lose about $2.2 billion apiece over five years, the House of Representatives report said.