Feds say Florida needs $1 billion in hospital funding for poor next year

TALLAHASSEE — Federal health officials told Florida Thursday that the state should expect big reductions in future years for a hospital payment program that's at the crux of a political stalemate blocking passage of a new state budget.

In a letter to state health officials, the U.S. Centers for Medicare and Medicaid Services said the state may justify needing about $1 billion in government funding for uncompensated care next year, or less than half of what it got this year, and even less in subsequent years. That's a clear message from Washington that Florida needs to reform its hospital payment system.

According to CMS, $1 billion from federal, state and local resources would "maintain stability while the system transitions" to new ways of compensating hospitals for costs of caring for poor patients, a program known as LIP or the low income pool.

Miami's Jackson Memorial Hospital is by far the largest recipient of LIP money. Tampa General Hospital, All Children's Hospital in St. Petersburg and Broward Health also are big recipients. They were promised $731 million this year in payments provided through federal and local tax money totaling nearly $2.2 billion.

In their letter, the feds did not promise any LIP money. But House Speaker Steve Crisafulli, R-Merritt Island, told lawmakers that the news is a "clear indication (that) Florida will receive a significant level of LIP funds, which will help us in our efforts to finish the budget."

The $1 billion cited by the feds would revert to the level of LIP funding before 2014.

Senate President Andy Gardiner, R-Orlando, told senators that the news is more proof that a form of Medicaid expansion is the answer.

"It remains clear that a sustainable long-term solution is needed," Gardiner said. "As you are aware, the Senate has proposed a Florida solution."

The letter said CMS has not made "a final determination on LIP" and hints that the $1 billion would come from a mix of federal and state money, but it keeps alive the prospect of some LIP money next year. Based on the traditional 60/40 Medicaid funding formula in which the federal government pays 60 percent, the feds would provide about $360 million in 2016 to give the state time to retool its payment system in anticipation of a phase-out of LIP.

The letter arrived at the state Medicaid agency a day after Gov. Rick Scott reiterated his view that "the Obama administration is walking away from a health care program for low-income families."

Scott had included $1.3 billion in LIP money in his January budget proposal. But when the feds balked at renewing it, he sued the Obama administration, claiming it used LIP to coerce Florida into expanding Medicaid, a form of insurance for low-income people run by states and funded largely by the federal government.

At a visit to an elementary school in Perry, Scott told reporters Thursday: "This is a federal program, so when they decide to start a program, they should not be walking away from a program. So my expectation is they continue to fund their program."

In its five-page letter, CMS also tries again to nudge the state toward Medicaid expansion, the other issue that has forced an extended stalemate between the Senate, which supports a form of health care expansion using federal dollars, and the House and Scott, who oppose it.

"The option to expand Medicaid to low-income adults remains available to the state, and as described later in this letter, could provide an estimated revenue increase of $2 billion annually to the Florida hospitals over and above funding through sources such as the LIP," wrote CMS director Vikki Wachino, who added: "The decision about whether or not to expand Medicaid is a state option, as we have noted previously."

The letter to Justin Senior, Florida's Medicaid director in the state Agency for Health Care Administration, says that the U.S. government intends to phase out LIP funding over the next few years to give the state time to implement a new coverage model.

CMS's letter follows a meeting May 6 between Gov. Scott and U.S. Health and Human Services Secretary Sylvia Burwell in Washington, which came after Scott sued the federal government.

Wachino wrote: "We have preliminarily concluded that the 2015-2016 funding should be at approximately $1 billion . . . to maintain stability while the system transitions."

While the latest action by Washington carries no guarantee of money, the feds appear to be edging closer to a resolution at a time when the uncertainty of LIP is a major factor in a long-running political impasse that has led to the worst political breakdown in Tallahassee in more than two decades.

The impasse has halted the start of budget negotiations and led to a House decision to prematurely adjourn on April 28, an act the Florida Supreme Court ruled was unconstitutional. It also prompted Scott to direct state agencies to prepare for a government shutdown if no budget is in place by July 1.

In its letter, CMS advises Florida that in future budget years (2016-2017 and beyond), the federal government estimates that Florida would need about $600 million in LIP money, also a mix of federal and local funds. That's intended to put the state on notice that it needs to create an alternate financing arrangement to compensate hospitals for the cost of charity care, including increasing payment rates to Medicaid providers.

At the feds' urging, state officials submitted a proposal to revamp the LIP program last month. But CMS expressed concern that Florida was trying to use the federal cash as an alternative to expanding its Medicaid program.

While the state Senate included a plan to accept federal Medicaid expansion money in its budget proposal, House Republicans and Scott opposed it.

Federal officials have said they will consider the state's bid to extend LIP separately from any Medicaid expansion plan. Yet, Thursday's letter from CMS makes it clear the agency favors expansion, which it says would result in "significant benefits to low income Floridians and the Florida health care system."

Times/Herald staff writers Michael Auslen and Kathleen McGrory, Miami Herald staff writer Daniel Chang and the News Service of Florida contributed to this report. Contact Steve Bousquet at bousquet@tampabay.com, call (850) 224-7263. Follow him on Twitter @stevebousquet.