Medicaid Cutbacks Divide Democrats

By Jonathan Weisman
Washington Post Staff Writer
Monday, November 28, 2005

Controversial House legislation designed to gain control of Medicaid growth has split Democrats, with lawmakers in Washington united in their opposition while Democratic governors are quietly supporting the provisions and questioning the party's reflexive denunciations.

The Medicaid provisions have become a flashpoint for the opposition of Democrats -- and some moderate Republicans -- to the $50 billion budget-cutting bill that narrowly passed the House last week. The provisions would reduce Medicaid spending by $12 billion through 2010 and $48 billion over the next decade, in part by making it difficult for more affluent seniors to transfer their assets to relatives, then plead poverty to get Medicaid to pay for them to stay in nursing homes.

But the measures would also save $2.4 billion over five years by allowing state governments to impose higher health insurance deductibles, co-payments and premiums on poor Medicaid recipients, including, for the first time, impoverished children and pregnant women. An additional $3.9 billion would be saved by relaxing mandated preventive health care and screening of children and pregnant women.

The changes would trim just 1.7 percent from a program expected to spend nearly $2.8 trillion though 2015, but the proposals have prompted bitter condemnation from congressional Democrats.

"As the number of people without health insurance has increased for four years in a row, Republicans are charging ahead with $45 billion in cuts to Medicaid -- the health insurance program that provides medical care to America's poorest children and many of the survivors of Hurricane Katrina," House Minority Leader Nancy Pelosi (D-Calif.) thundered Nov. 18, just before the pre-dawn passage of the bill. "Republicans give new meaning to the words 'suffer little children.' "

What she did not say is that those changes were proposed over the summer by a bipartisan task force of governors, led by Virginia's Mark R. Warner, whose popularity in a Republican state has made him a rising star in the Democratic Party.

In fact, the most controversial provisions in the House bill were adapted almost word for word from a document drafted by Govs. Warner, Tom Vilsack (D-Iowa), Haley Barbour (R-Miss.), Janet Napolitano (D-Ariz.), Mike Huckabee (R-Ark.), Jennifer M. Granholm (D-Mich.), Dirk Kempthorne (R-Idaho), Jim Doyle (D-Wis.), Mike Rounds (R-S.D.), and Edward G. Rendell (D-Pa.), said Ray Scheppach, executive director of the National Governors Association.

"The House has worked very closely with us," Scheppach said. "From our standpoint, Republicans and Democrats saw this very similarly at the state level."

The split has underscored the differing interests of Democrats in Washington -- out of power and struggling to capitalize on the declining popularity of their adversaries -- and Democratic governors, who take a more pragmatic approach. For governors, the soaring costs of Medicaid threaten to swamp state financing. Already, tens of thousands of people have been thrown off the Medicaid rolls in states such as Tennessee and Missouri, and governors have warned that those cuts will grow deeper if they do not have the flexibility to trim benefits more rationally.

So where Washington Democrats hope to highlight the partisan divide, their gubernatorial counterparts outside the Beltway have emphasized pragmatism and moderation, not only in the way they have governed but in their political campaigns.

That split -- over policy and style -- could come increasingly into focus as potential presidential contenders outside Washington, such as Warner, clash with congressional contenders, such as Sen. Hillary Rodham Clinton (D-N.Y.), as they jockey for position ahead of the 2008 White House race.

For now, Democratic governors have been willing to voice their opposition to the broader budget-cutting bill, attacking provisions that cut child support enforcement, narrow eligibility for foster care and adoption assistance, and impose stricter work requirements on welfare recipients with only modest increases in child care assistance.

"The president and his friends on Capitol Hill have put together a budget that does not reflect the values of everyday Americans," said New Mexico Gov. Bill Richardson, chairman of the Democratic Governors Association.

But they have conspicuously steered clear of the Medicaid debate that will continue to rage into next month, as House negotiators push their Medicaid provisions in conference with a wary Senate.

Thomas S. Kahn, the Democratic staff director of the House Budget Committee, said Democrats are unified on one point: Savings from changes to the Medicaid system should be used to strengthen health care for the poor, not pay for tax cut extensions that congressional Republicans hope to pass when they return in December.

"All Democrats agree strongly that cuts in Medicaid, especially those that hurt poor beneficiaries, should not be used to pay for tax cuts, especially those geared toward those at the top," Kahn said.

And gubernatorial support for the Medicaid changes may not be universal. In an Aug. 31 letter, Gov. Ted Kulongoski of Oregon implored Sen. Gordon Smith (R-Ore.) to oppose increased cost-sharing, especially for Medicaid recipients below the poverty line.

But Kahn and liberal activists acknowledged the fissure with governors is real.

The division stems in part from long-standing fears that if Washington gives states too much latitude over federal programs, some governors will go too far. Under the House bill, the $3 co-payment for Medicaid recipients below the poverty level would be allowed to rise annually with the medical inflation rate. For the first time, states would be allowed to refuse care for patients who refuse to pay.

States would also be allowed to charge co-payments, premiums or deductibles for visits to hospital emergency rooms for non-emergency care and for expensive prescription drugs not on a list of preferred medications.

What really worries liberal policy groups is a measure allowing states to impose any co-payment they want on Medicaid recipients who are above the poverty line, typically the working poor. Those fees are supposed to remain below 5 percent of beneficiaries' total incomes, but policy experts say that cap will be impossible to enforce. Most working poor will not be able to track their annual medical expenses to that degree of specificity.

The nonpartisan Congressional Budget Office estimated that by 2015, 11 million Medicaid beneficiaries -- half of them children -- will face fees they do not face today. About 80 percent of the cost savings from the bill would come not from the premiums and co-payments but from poor people no longer seeking medical attention.

Scheppach allowed that experiences do indicate higher fees might keep some people from seeking needed health care. But, he said, Congress should trust the governors to use the proposed changes wisely.

"We think governors are going to use these measures in a positive way, steering people away from emergency to non-emergency care or getting them drugs that are more affordable," he said, adding that if nothing is done about Medicaid costs, even more people will be cut from the Medicaid rolls entirely. "These are good policies for the long run."

© 2005 The Washington Post Company