A national coalition of hospitals on Tuesday filed a federal lawsuit to prevent the Bush administration from implementing a Medicaid rule changes that would reduce payment to safety-net hospitals by $5 billion over five years, the San Francisco Chronicle reports. A congressional moratorium on the rule change expires on May 25 (Fernandez, San Francisco Chronicle, 3/12). The rule would limit federal Medicaid payments to so that they would not exceed the cost of providing care. The rule change would apply to hospitals funded by local governments. However, the hospitals argue that the cuts would make it more difficult for public hospitals to offset the cost of treating the uninsured by increasing Medicaid charges.

The suit asks the court to bar the rule from taking effect because it would violate federal law by adopting payment limits that Congress previously rejected (Freking, AP/Seattle Post-Intelligencer, 3/11). In addition, CQ HealthBeat reports that the suit also says the rule should not be permitted to take effect because CMS overstepped its regulatory authority by setting the governmental status of jurisdictions under states' authority and because CMS improperly issued the rule on the same day that the congressional moratorium took effect.

The national coalition of hospitals that filed the lawsuit in the U.S. District Court for the District of Columbia includes the National Association of Public Hospitals and Health Systems, the American Hospital Association and the Association of American Medical Colleges (Johnson, CQ HealthBeat, 3/11). Alameda County Medical Center is the only named public hospital serving as plaintiff in the lawsuit (San Francisco Chronicle, 3/12).

Administration Response
The Bush administration said the cuts are intended to keep states from adopting Medicaid funding strategies that draw more federal funds without increasing the states' financial contributions to the program (CongressDaily, 3/12). CMS spokesperson Jeff Nelligan said the rule would preserve Medicaid's "integrity" and CMS believes the new rule "will bring greater transparency to the financing of the Medicaid program" (San Francisco Chronicle, 3/12).

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