New Medicaid regulations that will reduce federal funding to states will not hurt hospitals’ ability to prepare for terrorist attacks and other national emergencies, Secretary of Health and Human Services Secretary Michael O. Leavitt told a House panel Wednesday.

“Medicaid’s mission is not emergency preparedness. It is to provide health care to people, not institutions,” Leavitt said in testimony before the House Committee on Oversight and Government Reform.

“Well [Medicaid dollars] help people by supporting institutions,” responded committee Chairman Rep. Henry A. Waxman, D-Calif. “Our public hospitals are absolutely dependent on the Medicaid dollars” for items such as providing health care to the uninsured, and funding graduate medical education and other services. Waxman also said HHS should have first evaluated the impact of the Medicaid changes on trauma centers’ ability to prepared for emergencies such as terrorist attacks.

The regulations in question are part of a long struggle between states and the federal government over who should pay more for Medicaid, the federal-state health care entitlement for the poor. The regulations would eliminate or curtail federal reimbursement for a number of services the administration thinks Medicaid shouldn’t pay for, and they would change accounting procedures that the administration alleges states have used to draw more federal Medicaid dollars than they would otherwise be due. Democrats have included legislation to postpone seven Medicaid regulations in the must-pass supplemental war spending bill. (See related story, CQ HealthBeat, May 6, 2008)

Over time, Leavitt said, states have inappropriately claimed Medicaid dollars for services not covered by the program. “This is not intended to be a hospital entitlement,” he said, adding later that states are “trying to get a garden hose into the Medicaid fund.”

Leavitt said that if Congress believed more funding was needed to improve hospitals’ emergency surge capacity, then lawmakers should appropriate more money for that purpose. “I believe there are deficiencies in our surge capacity. I just don’t believe Medicaid funds should be used to deal with that deficiency,” he said.

Wednesday’s session was the second of two hearings the panel held to discuss the impending Medicaid regulations and their potential impact on hospitals’ emergency surge capacity. On Monday, trauma center officials told the panel that further reductions in federal funding will unacceptably weaken trauma centers’ ability to respond to emergencies with mass casualties. (See related story, CQ HealthBeat, May 5, 2008)

Department of Homeland Security Secretary Michael Chertoff, who also testified Wednesday, said it was unclear that more Medicaid funding would mean that hospitals would be better prepared to handle surge situations.

“I’m going to be the first person to tell you that there are undoubtedly gaps that need to be plugged, some of which are planning gaps and some of which care capability gaps,” he testified. “What I can’t tell you is that this is simply a matter of emergency rooms. I think it’s a much more complicated issue than that.”

The committee’s ranking member, Rep. Thomas M. Davis III, R-Va., said that in his experience hospitals sometimes use additional funding to invest in more profitable services, such as orthopedics.

“The nexus between Medicaid payments to hospital and emergency preparedness may seem intuitive, but it is by no means proven,” Davis said. “Extrapolating directly from daily emergency department utilization rates to catastrophic surge capacity overlooks complex and interrelated factors that differentiate single facility financial management from the broader resources needed to mount a coordinated regional disaster response.”

Daniel Fowler contributed to this report.