Medicaid provision for Nebraska raises ire

By Amy Goldstein
Sunday, January 17, 2010; A03

It was a single paragraph, added at the last minute on Page 2,129 of the Senate's mammoth health-care bill: a promise that the federal government would pay forever for extra poor people to join Medicaid in Nebraska. And it triggered a swift, partisan backlash.

The rebellion against the $100 million promise has spread to nearly one-third of the nation's attorneys general, including two Democrats. Meanwhile, the Nebraskan whose state would get the help -- Sen. Ben Nelson, a conservative Democrat who was the crucial 60th vote for the bill -- says he never asked for the favor to get his vote and wants it to go away.

The dispute is one of the issues Senate and House negotiators are trying to resolve as they work with the White House to mesh their health-care bills. On Friday, former president Bill Clinton joined the critics, telling House Democrats in a private speech in the U.S. Capitol, "That Nebraska thing is really hurting us."

As talks go on behind closed doors, debate rages off Capitol Hill over whether the Senate's offer of extra Medicaid money to one state is unconstitutional, as its critics allege, and whether any court would intervene. The furor comes from two sources: states' long-standing worries about the financial burden of Medicaid, and the polarized politics of health-care reform.

Expanding Medicaid

Medicaid, the government health insurance program that began in the 1960s for low-income Americans, is a shared responsibility of the federal government and states. How much the government pays depends on a state's wealth. The program covers about 45 million people and would be expanded, to different extents, under the Senate and House bills as one of the main ways to extend health coverage to the uninsured. The prospect of expanding Medicaid, though, comes as most states are struggling to pay for people already eligible for the program, because the economy has eroded state budgets and left many more Americans poor enough to qualify.

Under the Senate bill, the government would pay the entire cost of expanding Medicaid from 2014 through 2016. After that, all states would get substantially more federal help for newly eligible patients than they do today. But only for Nebraska would the government pay the whole cost permanently.

Before the Senate had cast its final health-care vote, Sen. Lindsey O. Graham (R-S.C.) telephoned his state's attorney general, Henry McMaster, a Republican candidate for governor, to suggest that he examine the constitutionality of the Nebraska provision. McMaster began to enlist other attorneys general -- dubbing themselves the "Cornhusker Kickback Working Group" -- to protest what he called "vote-buying . . . paid for by taxpayers." The group -- now expanded to 15 attorneys general -- has threatened to sue if the extra help for Nebraska remains in a final health-care bill.

Cost of helping Nebraska

McMaster said that the cost of helping Nebraska would fall on every other state. He said it is unconstitutional for congressional spending to be "arbitrary or capricious. . . . A state being treated differently because that was the price needed to secure that senator's vote, that is not a reason recognized by the U.S. Constitution."

Nelson said that, during his negotiations with Senate Democratic leaders courting his support, the question of Medicaid funding was "not what got my vote." But he added that he did tell Senate Democratic leaders the Medicaid expansion would be an "unfunded mandate" imposed on states -- the kind of fiscal liability he has criticized since his tenure as Nebraska's governor in the 1990s.

To solve the problem, Nelson said, he proposed that every state be allowed to cancel the expansion of Medicaid after 2016, when the full federal payments would stop. As a counterproposal, he said, negotiators suggested the permanent payments for Nebraska, estimated to cost $100 million in their first decade.

Several Senate sources, speaking on the condition of anonymity, confirmed Nelson's account that the money, as one said, "isn't something he came asking for."

Federal data show that Nebraska ranks in the middle of the 50 states in the proportion of its Medicaid expenses paid by the federal government -- and that it is below average in some of its eligibility levels and in the percentage of state residents it covers.

There are different views on how unusual it would be for Nebraska to get the extra Medicaid money. Congress frequently has allotted funds for what Donald A. Ritchie, the Senate historian, termed "things that are state-specific," including funds to repair New York City after the Sept. 11, 2001, attacks and New Orleans after Hurricane Katrina.

Congress has occasionally given extra money for Medicaid to one or a few states for specific reasons, but legislation that alters a major social program and includes statutory language giving one state special help is less common. "If the Missouri River had flooded and affected Nebraska and no other state, it would be altogether reasonable for Congress to enact legislation bringing relief to Nebraska," said William E. Leuchtenburg, a retired University of North Carolina historian of the New Deal. "That's not what's happening in the health-care bill. It . . . would affect all 50 states, and they are making an exception of a single state."

Constitutionality debated

Legal scholars differ on whether the help for Nebraska is constitutional. Harvard Law professor Mark Tushnet, a constitutional specialist, said if a court were asked to decide whether Congress had a "rational basis" for Nebraska's payments, "the bar is very low. . . . It can be made up by the Department of Justice as they rummage through statistics."

On the other hand, Eugene Volokh, a law professor at UCLA, said that while Congress routinely does pork-barrel spending, "the justification . . . there is a particular need for a bridge in a particular place . . . is an important fig leaf. Here there isn't even such a fig leaf."

But across the ideological spectrum, experts in law and history predict that courts would be reluctant to second-guess congressional spending. Charles Miller, a Washington lawyer who represents states in Medicaid matters, said courts usually have applied the standard of "arbitrary and capricious" cited by McMaster to the executive branch, not Congress. And Volokh said that courts have been highly deferential to Congress's judgment. Still, he said, for the attorneys general, the "point is not to persuade the court. It's to persuade the public."

Back in Nebraska, the Medicaid controversy has descended into a war of letters between Nelson and Gov. Dave Heineman, a Republican rumored to be considering challenging Nelson. "Nebraskans expect a fair deal, not a special deal," Heineman wrote in two open letters to Nelson. The senator wrote back that he would ask Senate and House negotiators to remove the provision "if it's the governor's desire."

Nelson said he thinks the Senate and House negotiators should follow his original idea -- let each state decide whether to cancel the Medicaid expansion after three years or give every state the same permanent payments. One Senate Democratic aide said that would cost an estimated $25 billion to $30 billion over a decade -- "a big leap budget-wise," another Democratic aide said.

The furor, Nelson said, has caught him by surprise. "You absolutely learn in the job," he said. "I'm not saying, 'Woe is me.' It's the price of being the 60th vote."

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