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Applicants for Utah's Medical Assistance Only Medicaid program will be able to use either incurred medical bills or cash to qualify, even if the state doesn't have a computer program in place to deal with the change.

U.S. District Judge J. Thomas Greene signed a stipulation on Monday ordering departments to allow use of medical bills starting Aug. 1. The number of applicants who can use medical bills will be gradually increased, based on the amount of the bills, until all applicants can use them by March 1, 1991.The order resulted from a lawsuit filed by Charlotte Howe and George Miller against Suzanne Dandoy, state Health Department director, Human Services Director Norman G. Angus and Rod Betit, director of the Division of Health Care Financing. The lawsuit claimed plaintiffs were wrongfully excluded from the program because they weren't allowed to use their medical bills to qualify.

Medicaid is a federal medical assistance program that pulls down federal matching funds on a $3-$1 ratio. The Medical Assistance Only program is optional, but federal law requires states that provide the program to let applicants use medical bills to qualify for the program. Utah has operated under a cash spenddown policy. To qualify, applicants have been required to pay the state the difference between income and eligibility levels.

In the past, someone with a monthly income of $500 had to give the state almost $200 to qualify for the program. Now if that individual can produce medical bills large enough to cover the difference, he can qualify for the program. Or he can still choose the cash option.

Utah officials maintain the cash spenddown system is more efficient and cost-effective, but Greene ordered the state to comply with federal guidelines.

The last legislative session allocated funds to cover the cost of converting to the federal system, but the computer program is not in place yet.

Greene's order acknowledges that, but said Utah must "handle such applications and track such bills by hand or by any other means available to them" to meet the stipulation's schedule.

The judge also ordered the departments to provide the court and Howe's and Miller's counsel with a monthly report that shows, among other things, how many people qualify to use medical bills on their spenddown, how many choose that option instead of cash.

Application sites must post notices that say, "You do not have to pay cash to get Medicaid - you can use medical bills instead." The signs must be in place by March 31 and may not be removed before Dec. 31, 1991.