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President Office — Press Release


March 19, 2015

CONTACT: Katie Betta, (850) 487-5229

MEMO: Senate Plan for Medicaid Sustainability

As we work together to develop the Fiscal Year 2015-16 General Appropriations Act, the single greatest unknown factor influencing our decision-making is the future of Low-Income Pool (LIP) funding. As you are aware, funds contributed by local hospital authorities and county governments, combined with the federal match, generate  more than $2 billion in funding that enables many hospitals to continue serving Floridians in need.

The LIP has helped Florida fund its Medicaid program since 2006. Last session, to account for delays in federal reauthorization of the LIP, the Senate passed its initial budget without a LIP model. The current-year model and associated federal funding were included during the budget conference after eleventh hour approval from the federal government. At that time, and several times subsequently, the Centers for Medicare & Medicaid Services (CMS) have clearly stated that the federal government will not approve an extension of the current LIP model for another year.

Understanding this history, the Senate budget aims to avoid brinksmanship negotiations with the federal government. Instead the Senate proactively proposes an alternative plan for Medicaid sustainability in Florida.

Today Chair Garcia will publish a proposal for the Health and Human Services portion of the Fiscal Year 2015-16 General Appropriations Act. Chair Garcia’s proposal includes a new LIP model which we believe offers a better chance for swift approval by the federal government.

The Senate’s Plan for Medicaid Sustainability seeks to preserve but restructure the LIP by changing the portions of the LIP that have received the most criticism from CMS. Our plan directs more funds to increase base hospital rates and more broadly distributes LIP dollars.

Under the Senate plan, the redeployed LIP will maintain an aggregate level of funding identical to the current LIP or $2.16 billion.

The Senate plan also maintains two crucial components of the current LIP:

  • Support for rural hospitals, trauma centers, primary care services, specialty pediatric hospitals, and safety-net hospitals, along with a special aspect of incenting quality (known as Special LIP; $116 million); and

  • Funding for primary care and other non-hospital providers, such as federally qualified health centers, emergency room diversion, county health departments, poison control programs, and medical schools ($322 million).

The Senate plan continues to provide a return on investment to local governments and hospital authorities that voluntarily donate their funds (local tax dollars), known as intergovernmental transfers (IGTs), but alters the methodology for the return on that investment, in ways which are consistent with how the federal government has told Florida the system must be changed. These changes include:

  • Funds previously targeted for specific hospitals will instead be distributed in a broad-based system so that all hospitals can benefit.

  • More than $200 million will be directed into the base funding for hospital Medicaid reimbursement.

  • An additional $234 million will be distributed among hospitals based on their Medicaid utilization and criteria regarding the provision of critical-needs services.

  • The donors’ return on investment will be limited and it will be the same for all IGTs.

The overall effect of the Senate plan is a new LIP that distributes funds more broadly, so more hospitals benefit, and does so in a manner our federal partners are much more likely to accept on an ongoing basis.

The Senate plan also asks our federal partners to amend certain Medicaid calculations so that our local partners are not penalized as a result of donating IGTs. Medicaid does not allow providers to be compensated beyond certain limits when providing Medicaid services. Under the current CMS method for calculating those limits, some IGT donors are being penalized for the IGTs they donate to the system. We are asking our federal partners to work with us to begin using a more realistic and fair method for calculating provider cost limits.

The Senate’s Medicaid Sustainability Plan couples the revamped LIP with the Health Policy Committee’s Florida Health Insurance Affordability Exchange (FHIX) program to provide private health coverage for persons under 133 percent of the federal poverty level who are not already covered by Medicaid. These two proposals, a new LIP and the FHIX, go hand-in-hand.

Gaining federal approval of the new Senate LIP model, as well as federal authority to fully implement the FHIX, are ambitious goals. I am confident, however, that our federal partners will recognize how the Senate plan benefits everyone involved. The Senate’s Medicaid Sustainability Plan is innovative, forward-thinking, and budget conscious. The plan is designed not only to provide market-based health insurance for Floridians currently in a coverage gap, but also ensure that the backbone of our health care system – community hospitals and safety-net hospitals – can continue relying on the Medicaid funding that has provided critical support since 2006.

Unlike last year when we had good reason to expect a last-minute federal extension of the current LIP, Washington has been abundantly clear: the LIP in its current form will not continue. If our Senate model does not gain approval from CMS and the federal government walks away from a LIP of some form, we simply cannot count on our local partners to continue contributing hundreds of millions of dollars. Such contributions are available only if the donors realize a benefit for their local taxpayers, and federal approval of a LIP is the only way to provide that guarantee.

Without federal approval of a new LIP model, state funds may be needed to help maintain hospital rates at their current levels. This state funding would be eligible for a federal drawdown that would more than double any funding we contribute. We must keep this risk in mind as we evaluate other spending priorities.

We can no longer wait for Washington. We must advocate for our own pro-active, market-based, Florida-driven solution for the enormous health care challenges facing our state. I look forward to your continued input and assistance with this important issue.