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Gov. Haley Barbour

Feds to Reimburse State $92 million

Remember that $90 million funding deficit for the Medicaid program that the Mississippi Legislature has been wrestling with all summer? It no longer exists.

At least that's what Gov. Haley Barbour announced at a press conference Sept. 8 in Jackson.

Barbour said an accounting error made in October 2003 resulted in the state paying more money than it should have for Medicaid. The federal government will reimburse the state enough money to balance the Medicaid budget for the 2009 fiscal year, which started July 1 and runs through June 30.

Barbour said the error was discovered in May while Medicaid employees prepared its budget.

Barbour had called a special session of the Legislature in May to address the funding shortfall. The on-and-off special session lasted through August and cost taxpayers $607,872, but lawmakers could not come to an agreement how to pay for the program. The House wanted to raise the state's cigarette tax, which at 18 cents a pack is one of the lowest in the nation, while Barbour, a former tobacco company lobbyist, refused to even consider a tax increase on cigarettes. Instead, he proposed two separate plans that would make cuts to Medicaid services and increase the tax on hospitals, but he has withdrawn them both. Under his latest plan, which has yet to receive final approval from the federal government, cuts he had earlier proposed would have been replaced with federal money associated with the program. Barbour said that plan would generate $88 million of the shortfall by increasing the gross revenue assessment on hospitals, which Medicaid can do without legislative approval. An additional $2 million would be generated by cuts of less than 1 percent on provider services.

A group of about 40 hospitals filed a lawsuit against the plan in August, arguing that Barbour should not be allowed to increase their fees to help pay for the shortfall because they say it could cause some hospitals to close, reduce services or lay off staff.

Fourteen Senate Democrats joined the legal challenge on Aug. 26. In court documents filed that day, they argued that only lawmakers can decide how state programs are funded.

"The circumstance that the legislative process has not yet produced full funding, or that the governor's preference in the method of funding has been frustrated in the Legislature, does not grant the governor constitutional license to bypass the Legislature and impose his tax plan by executive decree," state Sen. David Baria, D-Bay St. Louis, wrote in the challenge.

In July, Hinds County Chancery Judge William Singletary ruled on Barbour's first plan that Barbour cannot bypass lawmakers to raise hospital taxes, but Barbour, a Republican, said his second plan to use money owed to the state by the federal government, is allowable under Singletary's ruling.

When asked why he had allowed the special session to continue even after the accounting error was discovered, Barbour said negotiations with the federal government were ongoing.

"I think the right thing is not to build up people's hopes," he said during
the news conference. "We got this information Friday afternoon and will receive the money today (Sept. 8), we're told, by wire transfer."

Barbour said the state was getting a $92 million refund.

State Sen. Joey Fillingane, R-Sumrall, said the announcement is good news.

"We won't have to raise taxes on hospitals," Fillingane said.

This is the fourth consecutive year that Medicaid has been funded by "one-time" money. The governor and Legislature have been unable to find a long-term funding solution since the federal government changed the way Mississippi previously paid for
Medicaid, which serves almost 600,000 Mississippians, mostly the poor, elderly and children.

The Legislature will still have to come up with funding for the program next year, but Fillingane said he believes all parties will be able to come to an agreement about the cigarette tax.

"The governor's tax study commission has said they recommend
a cigarette tax increase, so I think we will definitely be looking at that. Now
that the governor's own tax study
program has recommended it, I don't think he'll oppose it."

The question then will be if cigars and smokeless tobacco should also be taxed more, Fillingane said, adding that he thinks they should be taxed.

Barbour said at the news conference that he still supports a hospital tax plan when the regular legislative session convenes in January, but House Medicaid Committee Chairman Dirk Dedeaux, D-Perkinston, told the Clarion-Ledger that the House will continue to push for the tobacco tax increase as a long-term solution to Medicaid funding.

"I think the cigarette tax is expected to be part of the solution to the Medicaid problem," Dedeaux said.

"It could have been worse," Fillingane said. "They could have found where we had been under-paying and we would have had to come up with $90 million more."

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