[Congressional Record Volume 148, Number 14 (Thursday, February 14, 2002)]
[Senate]
[Pages S855-S856]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. CARNAHAN:
  S. 1947. A bill to amend title XIX of the Social Security Act to 
clarify the circumstances under which a hold harmless provision does 
not exist with respect to a broad-based health care related tax; to the 
Committee on Finance.
  Mrs. CARNAHAN. Mr. President, in late October, I came to the Senate 
floor to address a dispute between the state of Missouri and the Health 
Care Financing Agency, now known as the Centers for Medicare and 
Medicaid Services, or CMS. I felt compelled to discuss the matter 
because of what was at stake, the future of Missouri's Medicaid 
program.
  Medicaid is a partnership between the Federal Government and the 
States to provide healthcare services to our most vulnerable citizens--
low-income children and seniors. Unfortunately, the Federal partner, 
CMS, is behaving irresponsibly.
  Since I last spoke about this issue on the Senate floor, CMS 
Administrator Tom Scully escalated the dispute to an unprecedented 
level. Not only unprecedented, but dangerous.
  On November 29, he sent a harshly toned letter to Governor Holden 
that called Missouri's tax on hospitals illegal and threatened to 
withhold $1.6 billion from the State.
  I am here today to call attention to an agency that is out of 
control. At a time when States are struggling to maintain service due 
to the recession, this agency has threatened to devastate Missouri's 
health care safety net. At a time when States and the Federal 
Government should be working for the common good, CMS is ignoring its 
own laws and regulations.

[[Page S856]]

  After our delegation appealed to top Administration officials, 
finally negotiations began on a long-term solution to the Medicaid 
funding issue. But just this weekend, reports emerged that CMS expects 
to pressure Missouri into accepting changes to the program due to its 
threatened legal action. I am all in favor of negotiations. But I want 
a bargaining table to be completely level. Our State should be free to 
act in the best interest of Missouri's citizens without a $1.6 billion 
lawsuit hanging over its head. That is why I am also introducing 
legislation today that seeks to put an end to this dispute once and for 
all.
  Governor Holden has stated that one of his top Federal priorities is 
to clarify that Missouri's provider tax is fully consistent with 
Federal law. That is what my bill does.
  Before I explain my legislative proposal, I want to describe the 
events that have brought us to this point in time. The subject of the 
disagreement is Missouri's provider assessment program, which is a tax 
on hospitals. States use the money generated from these taxes as their 
``match'' for Federal Medicaid dollars. Over ten years ago, Congress 
became concerned that States were using provider taxes improperly to 
increase the Federal contributions to Medicaid programs. In response, 
Congress enacted a law in 1992 that placed limitations on provider 
assessment programs.
  One specific limitation is that a provider assessment must not 
contain a ``hold harmless'' provision. This means that States may not 
guarantee that a hospital will receive back from Medicaid the amount of 
funds it paid to the State in provider taxes.
  In 1992, under the leadership of Governor John Ashcroft, now the 
Attorney General, Missouri complied with the federal law by enacting 
the Federal Reimbursement Allowance Program law. This law created a tax 
on hospitals, but contained no ``hold harmless'' provision. Governor 
Ashcroft signed the bill into law. Governor Carnahan continued the 
program, and Governor Holder is continuing it.
  For almost a decade, the program has been operating under the 
auspices of HCFA, now CMS. During this time, 100 percent of the 
revenues generated by the tax have been dedicated to Missouri's 
Medicaid program. The program has made Missouri a national model for 
using Federal, State, and private resources to provide health care to 
as many needy citizens as possible. This long-standing legal tax has 
assisted Missouri in creating a strong healthcare safety net for its 
children, pregnant women, and most vulnerable seniors.
  Much of Missouri's success can be attributed to expanded enrollment 
of eligible citizens in Medicaid. During the 1990's, the number of 
Missourians covered by Medicaid more than doubled, increasing from 
364,000 in 1990 to 839,000 in 2001. The number of children enrolled in 
Medicaid has grown at an even faster rate, increasing from 180,000 in 
1990 to 474,000 in 2001.
  An important step in covering more children was the enactment of the 
state's Children's Health Insurance Program, also known as MC Plus. 
Under the leadership of Governor Carnahan, MC Plus was designed to 
cover children up to 300 percent of the poverty level. It is a national 
model. Due to MC Plus, uninsured working parents could secure this 
previous health coverage for their children. The MC Plus program has 
made a difference in the lives of 75,000 children in Missouri.
  This combination of initiatives has sharply reduced the number of 
Missouri citizens that lack health insurance. In 1999, Missouri had the 
fourth lowest percentage of uninsured citizens in the country.
  These tremendous accomplishments, however, could be completely 
undermined because of a bureaucratic crusade to overturn Missouri's 
provider tax, a crusade that is not based on law.
  Let me explain. The letter CMS Administrator Scully sent to Missouri 
on November 29 was significant for several reasons.
  First, it was the first formal declaration from CMS that the agency 
found Missouri's State provider tax impermissible.
  Second, the letter included a draft audit that outlined the agency's 
case and claimed that it would seek to take back $1.6 billion from the 
State.
  Third, the letter opens the door for CMS to actually try to take back 
the money.
  Until this the draft audit was sent, CMS had only threatened action 
against the state. Now, this letter has made it abundantly clear that 
the CMS case is based on a flawed legal theory.
  The Federal statute says that there is a hold harmless provision with 
respect to the provider tax if the Secretary can determine that, and I 
quote from the statute: ``The State or other unit of government 
improving the tax providers--directly or indirectly--for any payment, 
offset, or waiver that guarantees to hold taxpayers harmless for any 
portion of the costs of the tax.''
  In the draft audit, Mr. Scully asserts that Missouri indirectly holds 
hospitals harmless. This leads one to ask the question, how is an 
``indirect guarantee'' defined under the law? The answer exists, but 
unfortunately Mr. Scully's letter does not include it. You can find the 
answer in the Federal regulations that govern how the Federal provider 
tax law should be implemented.
  On September 13, 1993, almost ten years ago, the U.S. Department of 
Health and Human Services issued final regulations for the new law. The 
regulations established an objective test to determine whether a 
government had an indirect guarantee. The regulations provide that if 
the tax on health care providers is less than 6 percent of the 
taxpayer's revenues, ``the tax or taxes are permissible.''
  Missouri's provider tax on hospitals has always been less than 6 
percent. Case closed.
  The bill that I am introducing today essentially codifies this 
regulation into law. If CMS were willing to abide by its own 
regulations, then this bill would not be necessary. But I am concerned 
from the actions the agency has taken and its responses to my inquiries 
on the subject, that CMS is pursuing an ideological agenda, not fair 
even-handed enforcement of the law.
  There is nothing wrong with the State law former Governor Ashcroft 
signed a decade ago. There has been no ``indirect guarantees'' to 
anyone. CMS should back off and allow Missouri to do what it has been 
doing well for over a decade, providing healthcare to its citizens.
  I encourage my colleagues to take a close look at my bill and support 
its passage.
                                 ______