Of all the budget problems faced by the commonwealth of Pennsylvania, the one least discussed is a behind-the-scenes accounting gimmick relating to its nursing homes.
 |  |
Thomas Kalkhof owns the Collins Health Center. He believes inequities in how the state reimburses homes for Medicaid patients -- in addition to industrywide problems in recruiting staff -- are at the root of his struggling facility's financial problems. (Steve Mellon, Post-Gazette) | |
Known as the intergovernmental transfer payment, or IGT, the financing method involving 21 counties and the state draws $800 million in federal Medicaid funds annually that would otherwise bypass Pennsylvania.
That budget bonanza is about to diminish.
Pennsylvania was one of the first states in 1991 to discover the special financing scheme, which is as complicated to explain as it is simple in its bottom-line benefits to the 30-some states that have used it.
The process starts with the 24-hour deposit of funds in a bank by a group of counties that own large nursing homes, such as Allegheny County's Kane system. The total amount of funds transferred for a day in Pennsylvania has been as much as $1.5 billion in recent years.
That figure represents the difference between how much nursing homes collect as Medicaid reimbursements and the potential maximum payments they could obtain if the same patients were covered by Medicare. The difference can amount to several hundred dollars a day per resident.
The counties transfer the funds to the state on a 24-hour basis, and the state counts that as its own money to earn matching federal Medicaid dollars. Normally, the federal government supplies 54 percent of the money spent on Medicaid in Pennsylvania, with the state covering 46 percent.
In the quick IGT turnaround of funds, the state is able to generate a federal match -- amounting to $820 million in the October 2001 transaction -- without putting in any of its own share. The counties get all of their original money back, and the proceeds of the federal match cover a transaction fee.
The rest of the $820 million becomes bonus revenue, which the Department of Public Welfare says it uses for a range of Medicaid-dependent programs and other health-related needs. For their part, the counties get a say in how the state uses the proceeds, with some of the money earmarked for special help to county-owned nursing homes.
More and more states adopted use of the IGT in the past decade, and some of the early adopters like Pennsylvania kept expanding it. The additional costs reached the point where the federal Centers for Medicare & Medicaid Services announced last year it would wean the states of IGT dependency.
"I can't blame the state of Pennsylvania for trying, but when you have a federal matching program, we believe states have to put up their share," said CMS administrator Tom Scully. "It's not helping anyone to get better health care when you substitute a federal dollar for a state dollar."
Thomas Kalkhof, administrator of Collins Health Center, a Friendship nursing home operating in bankruptcy, blames part of his financial problems on Pennsylvania's use of the IGT system.
He said states should only be using the proceeds for Medicaid-related purposes, particularly the care of low-income nursing home residents. He contends the funds in Pennsylvania have benefited many non-Medicaid programs and disproportionately helped county-run nursing homes, which are competitors of his.
In numerous letters to state and federal officials since early 2000, Kalkhof has railed against the use of the IGT proceeds.
He also filed suit, in a case pending in federal court in Erie, alleging misuse of the money by the state and counties. Kalkhof is seeking to have the revenues derived over the years returned to the federal government, with at least 10 percent given to him, a type of whistle-blower's fee sometimes available to private citizens under the federal False Claims Act.
The federal government is not supporting his case, however. Its only action relating to Pennsylvania's IGT process is to seek return of $89 million in federal Medicaid funds that were used to substitute for the funding match that counties are supposed to provide for nursing home care. The state has appealed that order.
Officials of the state Department of Public Welfare and Pennsylvania County Commissioners Association maintain they've handled the annual funds transfer legitimately all along.
"It was all done up front and perfectly legal," said David Feinberg, a private consultant in Harrisburg who was a DPW deputy secretary overseeing the IGT in the early 1990s.
"State officials have a responsibility to earn as much federal money as they can," he said. "The state is using it to take care of a lot of a poor people, earning extra money and serving all of its needs."
Present and former state officials say some of the money -- including about $500 million from the last transfer -- has helped give Pennsylvania one of the highest Medicaid reimbursement rates for nursing homes in the nation.
The largest use of the remaining money from last year's $820 million supported other long-term care initiatives, especially home- and community-based alternatives to nursing homes, welfare officials said.
Even if the state has a relatively generous nursing home reimbursement, Kalkhof said, it doesn't match the cost of providing care. A recent industry study suggested Pennsylvania Medicaid reimbursements are $12.72 per day per patient less than a nursing home's costs, and Kalkhof argues that more IGT proceeds should have been directed to private operators like him.
Kalkhof contends the money from the IGT was the main way the state built its Rainy Day Fund to $1.1 billion by early this year, before a fiscal crisis gutted it to one-fourth that amount.
Welfare officials acknowledge the influx of federal Medicaid dollars enabled state money to be directed to other purposes, but say that wasn't improper.
The bigger worry to state officials, and to nursing home trade associations that have generally viewed the IGT as benefiting their members, is the potential funding difficulties once a phase-out begins next year.
The windfall is being downsized by the federal government through 2008, with the shock of the blow to be first felt by the next governor in preparing the state's 2002-03 budget. The IGT revenue generated for Pennsylvania could be $120 million less than this year, as the first of successive 15 percent reductions.
By 2008, the state may have about $100 million to $150 million in IGT revenue to play with annually, instead of the current $820 million. That could affect reimbursements to nursing homes much more drastically than the amount Kalkhof believes they've been shorted already by the state's use of the funds.
"You are either going to replace the lost IGT funds with some other source of funds, or going to have to reduce the size of programs you're providing to conform with dollar amounts we have available," acknowledged Steve Rosskopf, director of the welfare department's budget office.
Mike Wilt, exective director of the Pennsylvania Association of County-Affiliated Homes, part of the Pennsylvania County Commissioners Association, said the budget dilemma has been pointed out to the gubernatorial candidates.
Presumably, either Ed Rendell or Mike Fisher will be happy to deal with it, because it means he will have won the election. But it won't make the job any easier for the winner, in already difficult budget times.
"It's kind of ironic," Wilt said. "We seem to be heading toward a situation where the Rainy Day Fund and the IGT are both going to be running into financial problems."
E-mail this story 
