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Governors differ on extent of flexibility for Medicaid

By Amy Goldstein and Dan Balz
Washington Post Staff Writers
Sunday, February 27, 2011; 10:57 PM

Democratic and Republican governors, burdened by crushing budget pressures from Medicaid, said Sunday that federal officials should allow them more freedom to change eligibility rules and other aspects of the public health insurance program for the poor. But they displayed sharp ideological differences over how far such flexibility should go.

After a series of private conversations at the National Governors Association's semiannual meeting over the weekend, leaders of the group formed a bipartisan committee to explore in detail what kind of flexibility over Medicaid the governors can agree to seek from federal health officials.

It remains unclear whether they will be able to forge such common ground, given their partisan disagreements over both Medicaid and the new federal law to reshape the health-care system. "The closer governors get to Washington, the more they start acting like members of Congress," said Oregon Gov. John A. Kitzhaber (D), vice chairman of the NGA's Health and Human Services Committee, referring to the rancorous debate over health care that persists on Capitol Hill.

Several conservative governors urged Congress and the Obama administration to convert Medicaid, a pillar of the nation's social safety net for nearly half a century, from an entitlement program to a block grant. The idea would be similar to the profound change that welfare underwent in the mid-1990s, when the government began to give states a fixed sum of money each year, along with latitude to spend it as they wanted.

"I'd like to have a block grant so we could make adaptations, state by state, as we see fit," said Wisconsin Gov. Scott Walker (R), the new chairman of the health and human services panel. Walker, who has drawn large protests and national attention for a proposal to disempower his state's public employee unions, took part in the meetings by telephone.

On the other hand, Kitzhaber said, if governors are to get extra maneuvering room to stray from Medicaid's rules, they must in turn be held accountable for expanding insurance coverage and improving the health of people in the program. Kitzhaber, a physician by training, also said that deviations from Medicaid rules should be handled by the Health and Human Services Department as case-by-case "demonstrations" - or temporary experiments, rather than broad, permanent changes to the program.

Medicaid provides health coverage for about 53 million lower-income Americans and is a shared responsibility of the federal government and states. The federal government picks up, on average, about two-thirds of the costs and sets minimum rules for which groups of people must be covered and what medical benefits must be included. States are free to go further, and most do.

Lately, Medicaid has become entangled in the massive fiscal difficulties facing states and the polarized politics surrounding the health-care law that Congress enacted 11 months ago.

The program's overall expenditures are predicted to increase by nearly 7 percent in fiscal 2010, and the states' share of Medicaid spending is projected to increase nationally by $25 billion in 2011, according to HHS's Centers for Medicare and Medicaid Services.

The law will, starting in 2014, lead to an expansion of Medicaid to an anticipated 20 million people with somewhat higher incomes, with the federal government paying for the new recipients for several years.

It has become a mantra among Democratic and GOP governors alike that they cannot afford the Medicaid program they have now. In their budget proposals for the coming year, many are recommending cuts in Medicaid services and in payments to some doctors, hospitals and other providers of care for patients in the program.

Traditionally, states also have been free to slow Medicaid spending by reining in who is eligible for the program. But most states now cannot make it harder to join, because of maintenance-of-effort rules in the new health-care law and a 2009 law, intended to stimulate the weak economy, that gave states extra Medicaid money that is ending this summer.

Last month, the nation's Republican governors wrote to the president and congressional leaders, asking for those rules to be removed. They revived the issue with their fellow governors. "I had to come up with $540 million to plug the Medicaid hole. I think we have gotten way too liberal with eligibility," Iowa Gov. Terry Brandstad (R) said. "The federal government, with the maintenance of effort, has really tied our hands."

Mississippi Gov. Haley Barbour (R) said states should also be free, for instance, to compel Medicaid patients to pay for part of their medicine, saying, "We have people pull up at the pharmacy window in a BMW and say they can't afford their co-payment."

Some Republicans said that the Medicaid constraints are reason to reopen debate over the entire new-health care law. Kitzhaber countered that the discord over the law's constitutionality is getting in the way of a meaningful discussion of how to improve the quality and cost-efficiency of the health-care system as a whole. He urged fellow governors to "recast this debate, not as about health care but about health. If we can change the frame, there is a lot of agreement."

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