Bush Medicaid Plan Draws Mixed Reviews

President Bush's proposal to reform Medicaid, a state-federal program that provides health coverage for 50 million low-income Americans, drew mixed reviews from governors, state budget directors and policy analysts at a Harvard University conference last week.

Bush's proposal would give states new powers to administer Medicaid in exchange for a fixed cap on the amount of money they receive from the federal government. The proposal front-loads the federal money to make it more attractive to states.

A bi-partisan group of 10 governors is currently negotiating with Bush administration officials over the particulars of the plan. Many governors like the plan's increased flexibility, saying it would help them control Medicaid costs, which have grown faster than tax revenues in recent years. But many governors fear the cap on federal funds would be a fiscally risky proposition for states.

Massachusetts Gov. Mitt Romney (R) said at the Harvard conference that increased flexibility is exactly what his state needs right now.

"We look at what we're doing in Medicaid and caring for the poor and disabled and to me it makes almost no sense at all. We get a series of mandates from the federal government telling us how we're supposed to deal with different populations and the result of these mandates just doesn't make sense," said the first-term governor.

According to Romney, Massachusetts pays 100 percent of the health care costs of someone who earns up to 200 percent of the poverty level. But for people making 201 percent of the poverty level, the state pays nothing at all. Romney said this discontinuity has left 500,000 working-class Massachusetts residents with no health coverage.

"There's no sliding scale at all. There's no recognition that at the higher end of income someone could afford to pay some portion of their premium or a co-pay than at the lower end," Romney said. With co-pays, Romney added, the state could extend limited health coverage to working families whose employers don't provide insurance.

Most conference participants agreed with Romney that more flexibility in Medicaid would be a good thing for state governments, although just how good, no one was sure.

But few thought Bush's proposal to cap federal payments is an option states should embrace. The fear is that if the economy stumbles anytime in the next 10 years and Medicaid rolls grow as a result, states would be forced to foot the bill for the program's extra enrollees.

Idaho Gov. Dirk Kempthorne (R), incoming chair of the National Governors Association, said it is likely that the Bush plan will allow states who prefer the status quo to remain with the current Medicaid program. He said a majority of states would likely choose this option.

"I think you may find there are 10 or 15 states that would like to go and venture forward and see if they can't find new ways of doing it more effectively given the same amount of money," Kempthorne said at the conference.

Drew Altman, president of the Kaiser Family Foundation, an independent philanthropy that supports research into the nation's major healthcare issues, was unenthusiastic about Bush's proposal.

"Were I still human services commissioner of New Jersey it is not a deal that I would take, and I'm quite sure of that. I would worry very much about the long-term implications for the state," he said, referring to the fiscal implications of the cap on federal funds.

Altman said he also doubts whether increased flexibility would result in significant cost savings. He said the part of the program in which the states will be able to innovate is the area that mainly supports elderly in nursing homes and low-income disabled individuals and that it would be very difficult to squeeze savings out of these populations.

"They represent a third of Medicaid beneficiaries. They represent two-thirds or more of Medicaid spending. They have huge health care needs," he said.

As a result, Altman said, the best way for the federal government to ease pressure on state Medicaid programs is to send them more money.

"The administration's plan isn't the big answer. So for the short-term that leaves just one very uninteresting option, and that's send money to the states, which the Congress just did. Boring though it may be, and unexciting though it may be, it makes a little bit of sense," Altman said.

Congress approved $10 billion in higher Medicaid payments two weeks ago as part of Bush's tax cut bill.

"That $10 billion part of the package for Medicaid may turn out to be, and I'm not sure if this is a positive comment, the single most important action that the Congress takes in health care this year," he said.

Kansas Budget Director Duane Goossen said he would prefer more money over increased flexibility, the exact opposite of what Bush's proposal would do.

"[W]e've been through a lot of debate: Are there ways that the program could be run more efficiently? . . .Ultimately to really hold the costs there it comes down to: Who will be eligible and who won't? Will you provide the services or won't you? Simply a greater federal commitment on that part is probably the most helpful thing to us."