Judge Negates Medicaid Rules That Would Cut Hospital Payments

Hospitals won a reprieve yesterday from a change in Medicaid regulations that would trim hospital payments by an estimated $5 billion over the next five years.

U.S. District Judge James Robertson said federal health officials' attempt to "outfox a clear directive of Congress" was unsuccessful, and he set aside the regulations.

In a law passed last May 24, Robertson said, Congress prohibited "any action" to implement the regulation limiting hospital reimbursements. Health and Human Services Secretary Mike Leavitt "rushed a typo-ridden final rule" to the Office of the Federal Register, the judge said, so the rule could be enacted before Congress's prohibition could be signed into law.

"In this case, the court is asked to decide whether a maneuver by the executive branch deliberately designed to outfox a clear directive of Congress was successful. The answer is no," Robertson wrote.

Hospital officials who sued the federal government to block the change said it is now up to the Bush administration to decide whether to republish the rule. If the government goes ahead, the rule would go into effect 60 days after publication.

Jeff Nelligan, a spokesman for the Centers for Medicare and Medicaid Services, said the administration will refrain from making the rule effective until Aug. 1, and he noted that Leavitt offered to work with Congress and the governors to discuss their concerns.

"We remain convinced that the rule will ultimately be upheld on its merits by the judge," Nelligan said.

Hospital groups said they would ask Congress to intervene.

"We are gratified at the overwhelming bipartisan opposition to this regulation, which would virtually dismantle our nation's health safety net," said Larry S. Gage, president of the National Association of Public Hospitals and Health Systems. "We urge Congress to continue to move ahead swiftly to extend the moratorium."