DES MOINES, March 24 -- Iowa has struck a deal with federal officials that allows the state to retain $66 million in Medicaid funding it would have lost this summer because of a crackdown on an accounting gimmick.
Donna Folkemer, a Medicaid specialist with the National Conference of State Legislatures, said Iowa is the first to strike an agreement that replaces money lost by the accounting change. "There are discussions going on between many states and the federal government," she said.
For years, Iowa and other states used an accounting practice -- awarding state money to hospitals and nursing homes, and then moving it back again -- to boost federal Medicaid matching funds. But Medicaid officials have told states that such transfers will not be allowed past July 1.
A congressional audit found that ending such practices could save as much as $1.5 billion in federal Medicaid funding.
Iowa stood to lose $66 million, and it feared that would mean cutbacks in services to the poor.
To prevent that, Gov. Tom Vilsack (D) said, Iowa officials agreed to the accounting change but asked for the same amount of money from Washington and proposed to spend it in such a way as to expand services to more working poor.
U.S. Health and Human Services Secretary Mike Leavitt agreed to the terms. In a letter to Vilsack this week, he promised to work with Iowa to give it flexibility in spending Medicaid funds.
"This will make us a laboratory, if you will," Vilsack said. "It would allow us to test-market ideas about providing more coverage for fewer dollars."