The Budget Train Wreck: Business Sense and the Low-Income Pool

The Budget Train Wreck: Business Sense and the Low-Income Pool

Today and tomorrow, I’m digging into what appears to be the crux of the budget train wreck in Tallahassee: health care funding related to uninsured residents. My critique will be based on reading the relevant documentation and offering what, I think, is a pretty straight-forward interpretation of it. Listening to the political rhetoric flying around the Capitol, I think there’s a great need to clear the air.

The issue in question is the conduct of the federal government (specifically the Centers for Medicare and Medicaid Services, or CMS) with regard to what is called the Low-Income Pool (or LIP) and the expansion of Medicaid eligibility. The former is something the Governor and the State House expects CMS to keep supporting; the latter is something they do not want to do.

Two key claims have been made against CMS in recent days:

  1. CMS is reneging on its commitment to fund the LIP.
  2. CMS is illegally attempting to coerce Florida by linking any extension of LIP funding to the state agreeing to expand Medicaid eligibility.

Today, we’ll tackle the first.

Governor Rick Scott has said repeatedly that he’s unwilling to consider expanding Medicaid coverage because he views CMS and the Feds more generally as unreliable partners. His proof: CMS has been holding up extension of the Low-Income Pool. Here’s one version of his statement (quoted from the source above):

Why would you trust them? . . . They have a federal program [the Low-Income Pool] that they are walking away from so how can we feel comfortable doing anything else with them until they live up to their side of the existing part?

Here’s the fundamental, factual problem with that argument.

The Low-Income Pool was created for Florida and funded by the Feds beginning in 2005. It was part of the “Medicaid waiver” negotiated between CMS and the state at our instigation, basically allowing Florida to address the health care needs of our poorest residents by methods and rules we proposed. CMS, after much negotiation and amendment, agreed to authorize the waiver for a limited period of time. The agreement was described (officially, in all cases) as a demonstration project.

Periodically, per the terms of the agreement, representatives of Florida’s Agency for Health Care Administration and CMS have negotiated over whether, and under what terms, to continue the Medicaid waiver.  If no agreement had been reached at one of these points, the relationship between the Feds and Florida regarding the administration of Medicaid would have reverted to the existing federal regulations. Among other things, that would mean that there wouldn’t be a Low-Income Pool.

The latest round of such negotiations took place in 2014. In agreeing to a renewed waiver, CMS was very, very, very clear about its intentions with regard to the continuation of the Low-Income Pool. Quoting from the February 27, 2015 report, Study of Hospital Funding and Payment Methodologies for Florida Medicaid, a report produced for Florida’s Agency for Health Care Administration by the consulting firm Navigant:


In 2014, when the mandatory Medicaid managed care portion of the waiver was renewed for an additional three years, the LIP program was only renewed for one more year.

What’s more, the terms of the waiver renewal included

A requirement for AHCA to contract with an independent consultant to conduct a review of the state’s funding and payment mechanisms. The intent of this study is to suggest ‘sustainable, transparent, equitable, appropriate, accountable, and actuarially sound Medicaid payment systems and funding mechanisms that will ensure quality health care services to Florida’s Medicaid beneficiaries throughout the state without the need for Low Income Pool (LIP) funding.’ (emphasis added by Navigant).

Leaders in Tallahassee absolutely should have known LIP was on the chopping block.

The good Governor has suggested that no one in the private sector would do business with someone who behaved the way CMS is behaving. But all CMS has done has been to give us a limited-time offer (and not that limited; a decade of having it our way, and receiving federal dollars to do it, is a pretty good run). That’s standard practice in the business world . . . well, at least the part about limited-time offers (I haven’t found a business that will give me money to do things my way). And when contracts are renegotiated, the terms of the contracts frequently change.

That’s all that’s happening here.

We are free to walk away from federal funding for various programs any time we like. We also are free to try to negotiate what we may think of as the best deal and, if we get it, to take advantage of it for as long as we can.

And Uncle Sam is free, when it comes to those specially negotiated arrangements with specified terms, to let those agreements run out and revert to their normal way of doing business.

As it is, Florida still is getting to run Medicaid in a way that isn’t exactly what Uncle Sam had in mind; the overall Medicaid waiver was renewed. But on this one piece (a whopping $2.2 billion piece), Uncle Sam simply is saying, “Time’s up.”

That’s the way special offers, limited-time deals, and demonstration projects work. We had a special deal. Now we don’t.

That’s not bad faith. That’s good business.

3 Responses to The Budget Train Wreck: Business Sense and the Low-Income Pool


    Had a chance to speak with Senator Rene Garcia. Brought up the fact that the Medical System in Florida is functioning decades behind the times and needs to be restructured. The Jackson Health System is an object in point. A never ending drain on the taxpayers wallet with no bang for the buck. CVS, Target, Wal-Mart are the wave of the future. Nurse practioners are the wave of the future. LIP and illegals who clog our emergency rooms with the sniffles and tummy aches could get quality care at these facilities and could most probably partially pay for the medical services. We desperately need to streamline our archaic Medical System and move into the 21st century.

    • Dr. Scott Paine

      Thanks for the comment, Richard. Innovation absolutely is the key.

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