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Kentucky challenges funding loss

The state has filed a lawsuit challenging the federal government's decision to cut off Medicaid funding for Oakwood, a Somerset home for people who are mentally disabled.

On a separate track, the state is seeking renewed certification to get federal funding for Oakwood, which has 201 residents.

The lawsuit claims that the decision to stop federal funding for Oakwood was faulty, in part because Oakwood had corrected a problem that played a key role in the decision to halt funding.

The lawsuit also argues that the head of the U.S. Department for Health and Human Services acted beyond his authority in ending Oakwood's participation in the Medicaid program.

The lawsuit, filed Tuesday in U.S. District Court in Frankfort, is the required next step in a legal process that has gone on for more than three years.

The federal government decertified Oakwood — dropping it from the Medicaid program — in late 2005 after a resident who wasn't being properly supervised drowned in a bathtub.

That was during a time when Oakwood was having significant problems. In 2005 and 2006, the facility received 24 serious citations for failing to keep residents safe.

Relatives of Oakwood residents say they have seen significant improvement there more recently.

The state appealed the decision to drop Oakwood from the Medicaid program, but an administrative judge eventually upheld the move and Oakwood lost federal funding beginning last May.

Before that, federal funding made up most of the money required to run Oakwood. The state has since paid the entire annual cost — $68 million — to run Oakwood, said Vikki Franklin, spokeswoman for the state Cabinet for Health and Family Services.

The lawsuit asks a federal judge to order the federal government to reinstate Medicaid funding for Oakwood.

However, the effort to get Oakwood recertified administratively might be the more significant avenue to get renewed Medicaid funding.

The state split Oakwood into four units last year with the goal of improving management.

The units are undergoing a series of federal inspections to help determine whether Oakwood will be recertified for Medicaid money.

Janie Miller, secretary of the state Cabinet for Health and Family Services, has said the state hopes to receive some federal funding for Oakwood by July.

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