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Governors Urged to Reach Deal on Medicaid

By Ceci Connolly and Dan Balz
Washington Post Staff Writers
Monday, February 28, 2005; Page A02

The Bush administration is urging the nation's governors to reach early agreement on a restructuring plan for the Medicaid health program for the poor or risk steep budget cuts in the Republican-controlled Congress, according to governors of both parties meeting this week in Washington.

In interviews, several governors balked at what they view as a threat by the White House to slash $60 billion from the program over the next decade. But others see a bipartisan deal emerging around securing lower prescription-drug prices, charging modest copayments and tightening loopholes that allow elderly people to transfer assets to children in order to qualify for Medicaid nursing-home care.

Minnesota's Tim Pawlenty (R) cites "the window of opportunity."

Discussions on Medicaid will dominate the next two days of the National Governors Association (NGA) meeting, with the governors scheduled to meet with President Bush at the White House this morning and congressional leaders at a private lunch today. They will host Health and Human Services Secretary Mike Leavitt tomorrow.

The Medicaid issue has taken on a greater sense of urgency as the administration's desire to slow federal spending collides with the governors' fear that Washington will try to reduce the deficit by cutting funding for a program that has strained state budgets in the past several years and whose growth all agree is unsustainable.

The federal-state program that serves nearly 50 million Americans has swelled in cost and enrollment as many people have lost private insurance and as health care prices have soared. Today, the program pays for two-thirds of all nursing-home care, and the cost of prescription drugs for low-income seniors is one of the fastest-growing components of the overall Medicaid budget.

Federal law requires states to provide health care to millions of low-income Americans at a level beyond that offered by some private health-insurance plans. Medicaid accounts for one of every five dollars spent by the states, and in many states, spending on Medicaid now exceeds that for education. The most significant growth of the program, originally created to serve the nation's poorest people, primarily women and children, has come from efforts to expand care to other members of the uninsured population, such as the elderly and the disabled.

With widespread agreement that the $324 billion program cannot continue in its current form, governors of both parties said they are amenable to long-term structural changes. But they worry that Bush is more focused on his shorter-term goal of cutting the federal budget deficit in half over the next five years. In private meetings with the governors, he has been seeking agreement on a plan to take to Congress and has warned that time may be running out before lawmakers take matters into their own hands.

Leavitt "did say that, given the crush of other business in Washington, unless we are aggressive and bold and visible within the next few weeks, he thinks the window of opportunity is going to close and Congress will go about its business in a way" that could be harmful to the states, said Minnesota Gov. Tim Pawlenty (R).

"The administration wants a deal by the end of the week," said New Mexico Gov. Bill Richardson, chairman of the Democratic Governors' Association. "We're going to resist that. It just shouldn't be 'our way or the highway.' "

At a private breakfast meeting, Virginia Gov. Mark R. Warner, the current NGA chairman, urged his Democratic colleagues not to rush into an agreement with the administration. He said many Republican governors share the Democrats' skepticism about Bush's proposed cuts. He recommended that they stay focused on policy changes that could also save money, rather than just on the bottom line.

Interviews with governors attending the annual winter conference revealed broad bipartisan support for a handful of adjustments, but those changes will likely fall well short of the budgetary savings the administration seeks. Democrats in particular fear that, even with some agreement, their Medicaid budgets will be cut dramatically as the administration tries to enforce spending discipline in Washington.

Over the past few years, almost every governor has been forced to limit Medicaid enrollment or to trim benefits to contain the rate of growth. Now many agree that the program needs a dramatic restructuring that would allow more discretion in how care is delivered and to whom. But they object to the budgetary ax that Bush is threatening to use.

"I've had to cut just a whole array of services from people and I'm done. I don't want to cut people off of health care; enough is enough," said Michigan Gov. Jennifer M. Granholm (D). "I will get busloads of people to come and march on Washington, and I think other governors will do the same. We will not stand for that. We have all cut and cut and cut."

In his 2006 budget, Bush has proposed reducing the federal share of Medicaid spending by $60 billion, largely through changes that Leavitt has characterized as eliminating waste, fraud and abuse. The new HHS secretary has publicly chastised governors for "accounting gimmicks" that he said enable states to use federal Medicaid dollars to cover some of the administrative costs of providing health care to the poor.

Some of those intergovernmental transfers probably should be eliminated, acknowledged Arkansas Gov. Mike Huckabee (R). However, "to suddenly say, 'Well, we told you you could, but now we're saying that you can't' -- and to do it abruptly -- that's a tough pill to swallow," he said.

"One person's loophole is another person's program," said Arizona Gov. Janet Napolitano (D). "What I'm worried about is, this is all about the budget and not about health care reform."

Democrats fear that, even if they agree to program modifications that would cut costs for both Washington and the states, the administration will continue to insist on deeper cuts in the upcoming budget. "Governors are really ready to consider some more dramatic proposals," said Tennessee Gov. Phil Bredesen (D). "This started as a very simple program for the poorest women and children and has grown into something much bigger and more complex."

Nevertheless, with the administration "faced with the short-term issue of getting the budget deficit under control," it may be difficult to reach a deal on broader changes this year, he added.

Although Democrats see the administration as trying to squeeze governors for a quick resolution, Mississippi Gov. Haley Barbour (R) offered a more positive interpretation of Leavitt's message.

"Secretary Leavitt is offering his assistance and advocacy if governors can come up with a bipartisan proposal," Barbour said. "What he's doing is offering to help promote something from the administration's perspective if governors of both parties can unite behind something."

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