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Topeka It started several years ago.
State officials were just getting over the budget meltdown from the post-Sept. 11 economic downturn, when another budgetary threat came barreling at them.
The Centers for Medicare and Medicaid Services, or CMS, started looking into whether Kansas was using improper techniques to draw down federal matching dollars for Medicaid.
The battle lines were drawn: State leaders said the federal government was changing the rules on them to reduce dollars flowing from Washington, D.C., while federal officials said they were simply trying to protect taxpayers.
Nearly a dozen audits and financial reviews later, the state is settling the issue that will cost Kansas taxpayers $90 million over the next 15 months, according to budget amendments submitted by Gov. Kathleen Sebelius.
"Kansas has made a concerted effort in each of these target areas to develop a comprehensive solution," Sebelius said.
But questions remain: Who was responsible for these costly mistakes, and what is being done about it?
The dispute was embedded in Medicaid, the taxpayer financed health insurance program that provides coverage to approximately 10 percent of the Kansas population. In Kansas, the federal government pays for about 60 percent of Medicaid, while the state supplies the remaining 40 percent.
The fight focused on funds spent before Sebelius took office and during her first term.
One of the major areas of conflict was over how school districts got reimbursed from federal funds for special education students who received services through Medicaid.
The federal government stopped allowing a "bundled rate," which the schools were using.
"Everything is packaged together and the feds agree to give one amount," Sebelius' budget director Duane Goossen explained. "For the future, we cannot do it that way anymore. We have to do it on a fee-for-service basis."
That change, including some other problems with special education reimbursements, will result in a reduction of federal funds of $37.5 million from past practices and the need for $16.1 million in state funds to pick up future expenses.
CMS deferrals of payments in other areas, such as child welfare and the community mental health system, will also result in the need to spend additional state dollars.
Kansas taxpayers will pay an additional $45.6 million in the current fiscal year "to make up for the loss of federal funds," Sebelius said.
And in the fiscal year that starts July 1, taxpayers will pay an additional $44.5 million in costs related to changes in state policy to meet CMS requirements, according to Sebelius' budget amendments.
Who's to blame?
But while state officials have identified the amount of funding needed to fix the mess, they have been less exact on who was to blame.
State Rep. Bob Bethell, R-Alden, chairman of the House budget committee that deals with Medicaid, said it was a combination of factors.
Over the past 10 to 15 years, as health care costs skyrocketed along with ranks of the uninsured, many states, including Kansas, aggressively sought ways to maximize federal Medicaid dollars.
Kansas may have pushed too hard, Bethell said.
"You want to run with the big dogs; you run with them, but for crying out loud, you don't bite their tails," Bethell said. "We pushed back to the extent they felt they had to do something."
A spokesman for CMS was unavailable for comment. But in the past, CMS officials have said the review of Kansas expenditures was similar to reviews occurring all over the country as the Bush administration increased scrutiny of the way states got federal health care dollars.
As negotiations between the state and CMS continued, the state got rid of its Medicaid consultant, MAXIMUS Inc.
"CMS was extremely pleased to hear we are no longer doing business with that consultant," said Marcia Nielsen, executive director of the Kansas Health Policy Authority.
MAXIMUS officials did not return a phone call seeking comment. The Virginia-based company, which provides consulting services to hundreds of governmental entities, has consistently denied interviews on the subject.
Nielsen said there has been some discussion about whether to take legal action against MAXIMUS. But at this point, she said, she is not sure that would be worthwhile because of protections in their contract.
"If there is no opportunity to go after them, I don't want us to spin our wheels. If there is an opportunity, we ought to think about it," she said.
At this point, Nielsen said she is more concerned with moving forward with CMS. She said the monetary damage could have been 10 times worse.
"CMS was very clear that if you can fix the problem, the liability will be mitigated," she said.
Bethell said state had learned an important lesson.
"As we go forward, we need everything in writing," he said. "The safeguard is in having legislators up here saying let's keep an eye on this."