Florida has been limiting Medicaid patients to six emergency room visits a year even though federal officials consider such a cap illegal.
As a result, the federal government intends to penalize the state by withholding a portion of Medicaid funding.
"We hope the state will realign their Medicaid program with federal standards to avoid this penalty," said Emma Sandoe, a spokeswoman for the Centers for Medicare and Medicaid Services.
The Florida Agency for Health Care Administration is in the midst of an appeal of the federal government's rejection of the six-visit limit. A September hearing is scheduled.
But while the fight has been pending, the state agency went ahead with its plan.
"We are concerned that CMS is prejudging this matter by seeking to impose administrative penalties" before the appeal has played out, said spokeswoman Shelisha Coleman.
"It's unfortunate that despite a September hearing to resolve the matter CMS is withholding matching funding," said Frank Collins, communications director for Gov. Rick Scott.
Federal officials did not estimate how many people have been denied Medicaid coverage for ER visits.
Of all Medicaid patients who visit the ER, less than 1 percent go more than six times a year, according to state estimates. In addition, the rule applied only to patients on traditional Medicaid. Most Medicaid patients are being shifted to managed care plans.
It's unclear yet how much the state could be penalized. CMS says it will initially withhold 10 percent of whatever the state claims for certain administrative costs. That amount will go up 5 percent each quarter while the state remains out of compliance.
Limiting the number of ER visits is intended to be a cost-saving measure. Republican lawmakers in 2012 said it would encourage patients to rely on primary care doctors instead of hospital ERs.
Scott proposed the annual cap on visits be 12 a year, though it was eventually reduced to six for non-pregnant adults over age 21.
But Florida needed federal permission. In December 2012, the Centers for Medicare & Medicaid shot down the initiative.
Such limits on ER visits, the federal agency says, violate the Social Security Act by "arbitrarily" denying coverage of a mandatory benefit and would not be in patients' best interest.
The state appealed the denial in February 2013. Federal officials say while working through the appeal, they learned that the state had gone ahead and put the limits in place.
Times staff writer Jodie Tillman can be reached at firstname.lastname@example.org or (813) 226-3374.