Medicaid Rule Changes Delayed

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Medicaid rules that would slash funds spent on youth in the child welfare and juvenile justice systems have been delayed because of a bill President Bush signed on June 30.

The president signed a supplemental military spending bill to which Congress attached a moratorium on six Medicaid funding rules that had been issued by the Centers for Medicare and Medicaid Services (CMS).

One of those rules would have eliminated Medicaid funds for targeted case management, meaning that states could not spend federal Medicaid money for services that CMS deemed to be "intrinsic elements" of other social programs. (See sidebar on "Medicaid's Buried Treasure," April). Those services could have included addressing the mental and physical health needs of youth who are involved in open child welfare cases or who have had contact with the justice system.

The rule would make it "impossible for Medicaid to do the very thing that sets it apart from commercial insurance," says Sara Rosenbaum, a health care expert at George Washington University's School of Public Health. "The fact that these children are in the juvenile justice system, or in foster care, is irrelevant" to whether Medicaid should cover their care, she said.

Another rule would have limited Medicaid spending on rehabilitative and academic services.

The moratorium delays the rules until April 2009.

Still not delayed is a CMS rule on State Children's Health Insurance Program (SCHIP), which would prevent any state from expanding SCHIP programs unless it could prove that it was already covering 95 percent of youth in its lowest income brackets. (See "SCHIP Limits: Who Holds the Cards?," May.) That rule goes into effect in August.

It is uncertain how the new moratorium will affect state legislatures, some of which have drafted fiscal 2009 budgets under the assumption that they would be without some federal Medicaid money.

Could states now revisit their spending assumptions? "I don't see why not," Rosenbaum said. "The new fiscal year hasn't started."

In at least one state, it may be too late. Tennessee's Department of Children's Services took a $73 million cut due entirely to the CMS rules, according to Linda O'Neal, executive director of the state's Commission on Children and Youth. That budget bill, which covers parts of fiscal years 2008 and 2009, has already been adopted by the state legislature and signed by Gov. Phil Bredesen (D).

As a result, two popular diversion programs for juvenile offenders have been cut. A Sporting Chance, a juvenile mentoring program in Paris, Tenn., shut down the same day the president signed the moratorium.

Carroll Academy, an alternative school that has served juveniles in five counties since 1994, will cut back from 250 youth served last year to about 130, according to Randy Hatch, the juvenile court director in Carroll County, Tenn. The academy boasts a 96 percent daily attendance rate.