Governors Voice Concern Over Bush Medicaid Plan

Participants in the National Governors Association midwinter meeting are pleased that Medicaid -- one of the states' biggest budget busters -- is atop the federal agenda. But several governors attending the Washington D.C. meeting expressed concern over the long-term fiscal effects of the Bush administration's proposed reforms .

Health and Human Services Secretary Tommy Thompson has urged the governors to endorse the President's plan to overhaul Medicaid, the state-federal program that provides health insurance for 44 million low-income, elderly and disabled Americans.

Congressional Republicans and Democrats are divided on how to reform the program.

"It's clearly a good idea to pursue (Medicaid reforms), but I don't believe there's enough clarity or momentum behind any of the current proposals," Wyoming Gov. Dave Freudenthal (D) told Stateline.org.

The federal government's share of Medicaid funding currently amounts to about $216 billion annually. Bush's proposal would increase the federal share by $12.7 billion over 10 years, and $3.25 billion of that would flow to the states in fiscal year 2004 to help them deal with their budget crises.

To offset the frontloaded infusion of Medicaid cash, federal payments to states would be significantly reduced in the final three years of the 10-year plan. Acknowledging there are many "unanswered questions," Thompson said the voluntary federal plan will save states money upfront and give them greater flexibility to design long-term Medicaid programs.

Under the proposal, which Thompson discussed with governors Monday at a White House briefing and at a more lengthy later meeting, states would receive fixed amounts of money. The federal government would eliminate matching dollars for optional populations and end the need for Medicaid waivers. States would have to meet basic coverage mandates, but could limit or extend optional services as they saw fit.

Forty-two states plan to cut some optional Medicaid services in fiscal year 2004. Such services include dental care, prescription drug coverage and coverage for children and pregnant women just above the poverty level.

"I can't imagine a governor that's faced with cutting an entire optional population who would not take the deal," Thompson said, explaining that under current Medicaid law, states that drop a group of beneficiaries also lose the federal matching dollars for that population.

Addressing the governors, U.S. Rep. John Dingell (D-Mich.) and U.S. Sen. John Breaux (D-La.) sparred with Thompson, saying the plan is pushing "block grants" and questioned how it would affect state budgets down the road. Dingell warned governors to "read the fine print" before signing on. "I'm very concerned about the fact that we're giving you more money up front, making it very attractive to say yes, but then in the last three years we're taking it back," Breaux said.

Thompson repeatedly denied that the plan equated to block grants to the states.

U.S. Rep. Ed Whitfield (R-Ky.) backed the administration's exploration of options beyond the conventional Medicaid program and said the plan allows states to use innovation to find new solutions to old problems.

Arizona Gov. Janet Napolitano (D) said she's waiting for more details.

"If it provides more money and flexibility for the states; that I'm for. But we really need to understand the full fiscal ramifications of what's being proposed, Napolitano told Stateline.org.

Napolitano, like other governors, is concerned that states could face even more dire budget problems in the future if Medicaid enrollment grows but subsidies decrease.

Some Republican governors applauded the administration's efforts.

"(Governors) need the flexibility now and we need money now and I would just commend the administration for coming up with, if nothing else, a creative way of giving us money in the near-term," South Carolina Gov. Mark Sanford (R) told colleagues. After listening to Thompson's plea, Florida Gov. Jeb Bush (R), said he supports changing the Medicaid infrastructure.

"Without having all the details it's impossible to sign up right now, but I'm very excited about the prospect of Medicaid reform," Bush told Stateline.org. "Constantly funding Medicaid through additional dollars without making any reforms just makes no sense at all. As a former governor, (Tommy Thompson) understands our challenges."

Bush said he hopes to be part of the proposed bipartisan task force of governors that will work with HHS and Congress on drafting Medicaid reform.

Connecticut Gov. John Rowland (R) encouraged fellow governors to take an active role.

"Instead of reading the fine print, we should be writing the fine print over the next few weeks," Rowland said.

But desperate fiscal situations that threaten health care service are leading even those skeptical of the plan to consider it.

"I don't think this plan is, for my state, the answer, but it is thinking outside the box. I am willing to take a look at it," said New Mexico Gov. Bill Richardson (D).

Gov. Brad Henry, a freshman Democrat from Oklahoma, said it was important for the governors to reach consensus on the issue.

"We all have very similar concerns in regard to Medicaid. We all believe we need more money and more flexibility. It's important that we as the nation's governors get together on this. It's important for governors to speak as a united, cohesive voice," Henry said.

The NGA has proposed several Medicaid reform principles, which include a call for the federal government to assume responsibility for people who are eligible for both Medicaid and Medicare.

Washington Gov. Gary Locke (D) said the governors want to work with the administration and Congress to come up with a satisfactory, bipartisan plan.

"The devils are in the details," Locke said.