New Medicaid Regulation Will Curb Abuse, Save Money

Ruzanna Harutyunyan's picture

"I strongly disagree with your interpretation" of a Medicaid regulation announced last week that "clarifies" services covered under the program's outpatient hospital benefit, HHS Secretary Mike Leavitt writes in a New York Times letter to the editor dated Nov. 14, responding to a Nov. 12 Times editorial (Leavitt, New York Times, 11/20).

Under the newly revised rule, outpatient hospital services do not include those that could be provided and covered outside a hospital. The Bush administration said the clarification was necessary because the provision under its current definition was vague and allowed states to overcharge CMS for medical claims (Kaiser Daily Health Policy Report, 11/10).


The editorial states that the "Bush administration has callously decided to reduce Medicaid payments to hospitals for their outpatient services," and the "impact on the poor and the hospitals that serve them could be severe." According to the editorial, hospital leaders and state Medicaid officials said the clarification might "force safety-net hospitals with huge Medicaid burdens to cut outpatient dental and vision care and various services for children, among other reductions," adding, "That could be a serious blow in many poor neighborhoods where there are few if any private practitioners willing to take Medicaid patients" (Kaiser Daily Health Policy Report, 11/12).

Leavitt writes, "This regulation seeks to restore accountability and transparency" to Medicaid, adding, "Hospitals can continue to provide Medicaid services in their outpatient clinics," and "state Medicaid programs can continue to adjust payments to recognize the needs of those facilities." He continues that HHS "recognizes that many hospitals are safety-net providers in areas where private practices are scarce," noting that "Medicaid will pay for these services appropriately, but not exorbitantly." The letter concludes, "Every dollar we save by paying prudently is a dollar that can cover even more eligible and deserving people" (New York Times, 11/20).

Reprinted with permission from You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at . The Kaiser Daily Health Policy Report is published for, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.