With cash-strapped Illinois facing a backlog of Medicaid bills, Comptroller Dan Hynes this week called on federal authorities to increase Medicaid funding to Illinois and other states to ensure payments keep flowing to struggling service providers.

Hynes urged the action in a letter to the state’s U.S. senators, Richard Durbin and presidential contender Barack Obama, both Democrats. Hynes said reduced tax revenues and tightened credit markets caused by the current financial crisis are severely undermining Illinois’ ability to administer its Medicaid program.

“As cash flow decreases and government payment delays increase, credit markets have severely impacted providers of vital services such as Medicaid,” Hynes said. “With increasing frequency, providers are finding their own credit lines frozen or reduced at a time when the demand for such services and their cost is expanding. This unfortunate phenomenon is placing the health care and social service infrastructure of the states, and the means of implementation for many federal programs, in jeopardy.”

Hynes called for an increase in the percentage of Medicaid costs reimbursable to the states by the federal government similar to an increase approved in 2003. Such an increase would provide Illinois with roughly $240 million in additional funding over four quarters. Hynes also recommended that federal authorities accelerate the states’ anticipated federal Medicaid reimbursement for the remainder of fiscal 2009 through a single advance payment to provide cash liquidity to state governments. Currently a state is reimbursed for Medicaid outlays only after it pays for those costs.

Hynes said Illinois faces payment delays of 45 business days and that number could worsen. He recently reported that the state had $1.8 billion in unpaid bills from the last quarter. If the federal government acts on the suggestions, Hynes said the state could additionally save by avoiding the need to borrow cash-flow notes.

“This action would stabilize Illinois’ finances in the short term, prevent reductions in Medicaid and other social service levels, and avert potential closures of vital facilities. It would also benefit all other categories of Illinois payees including school districts, higher education, and local governments currently affected by the state’s weakened fiscal condition,” Hynes wrote.

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