July 22 and 23

Discussions on Ramifications of Advancing Medicaid Payments:


Concern has been raised regarding the consequences of converting Medicaid payments to advances or prospective payments for services not yet rendered. Advances, as prospective payments are grants. As grants the payments are subject to grant recovery provisions of the statute.

  1. Question: How will advances be reconciled?

    Answer: As per the Attachment B of the community services contract, reconciliation will be based on agency wide accumulated expenses verses agency wide earned revenue regardless of program source or Medicaid verses non-Medicaid service lines. The past standard practice of reconciliation by individual funded programs will be suspended in FY 2005. 

  2. Question: If this (FY 2005) is a held harmless year, why can't we go back to how Medicaid payments were made in the past?

    Answer: FY 2005 is a transition year and the Attachment B of the contract a transition document reflecting elements of the past practices and active elements to address conversion to fee-for-service in FY 06 or shortly thereafter. The overwhelming concern in the conversion was cash flow; ensuring payments in sufficient volume and timeliness were made to assure provider financial certainty and stability. In so doing payments will be made in 1/12 increment in advance of services rendered and for the first time anticipated Medicaid payment would be advanced in total.

    The system cannot continue the practice of separating or segregating the FFP portion of the payment from the GRF portion. Medicaid reimbursements are earned by the state after the entire service has been paid in full. So with the increased Medicaid revenue targets, and the merging of both GRF & FFP payments, failure to advance funds would result in diminished cash flows when compared to past years. Therefore advancing payments for Medicaid services was offered to address the issue.

  3. Question: But this is a change from past practice and isn't fee-for-service! In fact it's converting a payment earned as purchase of service and converting it to a grant!

    Answer: Transitions by definition are a combination of elements moving the system into a different and desired direction. Compromises are made that reflect elements of multiple reimbursement systems that are awkward to balance. To respond to focused concerns regarding cash flow, which fee-for-service affects, advanced payments were preserved. In the meantime the test phase agencies would test the appropriateness of the Medicaid targets and other issues to assist in determining the future configuration of fee-for-service. 

  4. Question: The contract amendment sent is problematic. The contract itself doesn't give authority to reconcile Medicaid on an expense basis, the amendment does. If we refuse to sign the amendment but return the signed contract, will a contract be fully processed and executed?

    Answer: First the amendment was sent to clarify what was ambiguous to some. It is the Department's intent, representation and position that capacity grants, Medicaid and non-Medicaid allocations, as a whole be reconciled against agency wide mental health expenses. Second, an error was made in the initial contact cover sheet that was misleading. The point of the amendment was to clean it up. Lastly, failing to sign and return the amendment will not block the processing of a contract. The reconciliation provisions cited however will still apply. 

  5. Question: How and when will agency allocations be adjusted to reflect actual FY 2004 claiming inclusive of the retrospective claiming efforts made by community agencies?

    Answer: Traditionally adjustments are made to agency contracts in the late Summer early Fall amending the contract to reflect the final budget approved as it varied from the Governor's February budget request. The question asked here, is more complex. The language in the Memorandum of Understanding and the Finance Act implementing the budget agreement appears to significantly constraint FFP (Federal Financial Participation) earned and deposited into the 718 Trust Fund.

    There will be a revised distribution of Mental Health Trust Fund receipts. Beginning with State Fiscal Year 2005, the first $95,000,000 received by the Department shall be deposited 26.3% into the General Revenue Fund and 73.7% into the Community Mental Health Medicaid Trust Fund. Amounts received in excess of $95,000,000 in fiscal years 2005 and 2006 shall be deposited 50% into the General Revenue Fund and 50% into the Community Mental Health Medicaid Trust Fund. This policy will be reexamined prior to fiscal year 2007.

    Possible responses and actions to consider retrospective/enhanced error reporting claiming into each agency's FY 2005 base are being explored.