Stateline Story

Governors to Lobby for Medicaid Reforms

The nation's governors are seeking consensus on a new blueprint to fundamentally restructure Medicaid, the government's largest health care program, that seeks to stem its exploding costs without cutting off medical care for more Americans.

A task force of 11 governors released a four-page summary on June 1 of proposals that now will go before all 50 governors at the National Governors Association's annual meeting in July. More details are expected to emerge June 15 when NGA Chairman Gov. Mark Warner (D) of Virginia and Vice Chairman Gov. Mike Huckabee (R) of Arkansas testify before the U.S. Senate's Finance Committee.

The NGA plan, many elements of which previously have been reported, focuses on granting states more flexibility to try innovations in managing their Medicaid programs, on making it easier for low-income and disabled people to secure private health insurance, and on reducing Medicaid's role in funding nursing home and long-term care.

Skyrocketing costs and swelling membership rolls have in recent months propelled Medicaid, the 40-year-old federal-state program that serves 53 million low-income and disabled Americans, to the forefront of the nation's domestic policy agenda.

Medicaid has eclipsed K-12 education as the single largest portion of states' budgets, making it a top concern for governors. But the program, which pays for nearly half of all long-term care and covers almost two-thirds of nursing home residents, also has captured the attention of budget cutters in the White House and Congress.

The governors' proposal, which they hope will help sway Congress' efforts to reform Medicaid, calls on the federal government to:

  • Allow states to adopt tiered, enforceable co-payments for prescription drugs that Medicaid covers.
  • Give states more freedom to innovate by cutting the federal red tape and long waits for states seeking exemptions to Medicaid rules.
  • Remove legal barriers to states managing optional Medicaid benefits, in an effort to keep states from landing in court when they try innovative Medicaid strategies.
  • Establish a National Health Care Innovations Program that would support 10-15 state-level health care reform initiatives.

Governors adamantly oppose a congressional proposal to cut $10 billion from the $330 billion Medicaid program over five years and argue that federal and state officials should focus on achieving long-term reforms to pare Medicaid costs instead of letting budget cutbacks drive the debate.

A bipartisan group of 11 governors, consulting with Medicaid officials from at least 30 states, has been holding teleconferences since early this year to draw up a counter-proposal to Congress' budget plan to chop the program.

Governors also announced June 1 that they would not join in a commission headed by U.S. Health and Human Services Secretary Michael Leavitt that has until Sept. 1 to devise a strategy to achieve the $10 billion in cuts. Congressional Democrats also oppose the cuts and are boycotting the Leavitt panel, which still is being formed. Nominations to the panel are due June 3.

Governors plan to move forward with their own recommendations independently and present final versions to Congress as well as to the commission. NGA officials say the final proposal will build on elements of the interim policy.

One controversial area that many governors are reluctant to touch is the accounting loopholes that some states now use to qualify for additional federal money, known as intergovernmental transfers.

The Bush administration, which has proposed eliminating the transfers, identified 15 states as using the techniques to get millions of extra federal dollars.

The Center on Budget and Policy Priorities, a Washington think tank that focuses on policies affecting the poor, released a study May 31 on the effects of making Medicaid beneficiaries responsible for more costs associated with their health care.