Bush Plan to Revamp Medicaid

Would Shift Powers to States

The Bush administration put forward a plan to revamp the nation's largest public health insurance program, offering states vast new power to dictate what medical services are provided to many of the poor and disabled Americans on Medicaid and how much patients have to pay for them.

The proposal would hand states a strong financial incentive to make major changes in the program. States could put new restrictions on benefits, shift more people into managed care, charge more for services and employ new strategies to give some coverage to people who are currently uninsured. States willing to undertake such experiments, which no longer would require federal permission in advance, would be given extra money -- totaling $12.7 billion -- for the next seven years, although their subsidies would be cut later to make up the financial difference.

The plan is the administration's answer to recent pleas by states for federal relief from soaring Medicaid expenditures that are the largest contributors to historic budget deficits across the country. Instead of simply providing bigger subsidies for the program, as many governors and Democrats want, the administration is proposing to tie such assistance to "a real, major modernization," that would give states "complete new flexibility," Health and Human Services Secretary Tommy G. Thompson said.

Medicaid is a shared responsibility of the federal government and the states.

None of the changes would affect the roughly two-thirds of the 44 million Americans on Medicaid who are so poor that federal law requires they be covered by the program. But in states that took the government's offer, the proposal could revolutionize care for the remainder -- about 15 million additional low-income people, many of them children and elderly people in nursing homes -- whom states also have chosen to include.

-- Amy Goldstein

FBI Searching for Thousands

Of Missing Iraqi Immigrants

The FBI has launched a concerted search for several thousand illegal Iraqi immigrants who have gone missing while visiting the United States and are among those being sought for voluntary interviews in advance of a possible war with Iraq, officials said.

Although the majority of Iraqi immigrants are viewed as being opposed to Iraqi President Saddam Hussein and sympathetic to the United States, federal authorities are concerned that others who have disappeared from the government's view are more likely to be agents of the Iraqi regime or allied with terrorist groups, officials said.

For example, several U.S. officials said, Hussein's government is known to have recruited Iraqi students studying in the United States to gather information and intelligence on U.S. technology.

The search for the missing Iraqis, estimated by immigration officials to number 3,000 or more, has become one of the primary objectives of a broader, FBI-run program aimed at locating and interviewing as many as 50,000 Iraqi nationals who have entered the United States as visitors or refugees within the past decade or so.

-- Dan Eggen

Would-Be Shoe Bomber

Sentenced to Life in Prison

Richard C. Reid, the British drifter and Muslim fundamentalist who attempted to detonate explosives in his shoes during a transatlantic flight, was imprisoned for life as the first admitted member of al Qaeda sentenced in the United States since the terrorist attacks on Sept. 11, 2001.

Reid, 29, remained defiant, describing himself as a soldier of war and denouncing U.S. policies against Muslim nations as justification for his attempted downing of American Airlines Flight 63 in December 2001. Nearly 200 passengers and crew members were aboard the Paris-to-Miami flight.

In a dramatic climax to the two-hour proceeding, Reid was muscled out of the courtroom in handcuffs by four federal marshals after shouting at U.S. District Judge William G. Young. Young had concluded the sentencing with a stern defense of his decision to put Reid behind bars for life.

"We are not afraid of any of your terrorist co-conspirators, Mr. Reid. We are Americans. We have been through the fire before," the judge said. "You are not an enemy combatant -- you are a terrorist. You are not a soldier in any war -- you are a terrorist."

-- Pamela Ferdinand

Sharon Wins Israel's Election;

Support for Tough Tactics Cited

Prime Minister Ariel Sharon won a decisive victory in Israel's election, gaining an overwhelming endorsement for his harsh military crackdown on the Palestinian uprising and his tough response to terrorist attacks against Israeli civilians.

The outcome was a blunt repudiation of parties that advocate more conciliatory policies toward the Palestinians, particularly for Amram Mitzna, the Labor Party leader who campaigned on a platform of reopening long-stalled negotiations and withdrawing from the Gaza Strip and most of the West Bank.

The results could make U.S.-Israeli relations more difficult by hardening Israel's stand in U.S. and European efforts to revive peace talks and end the 28-month-old uprising that has killed more than 700 Israelis and 1,800 Palestinians. If the Labor Party and other centrist parties rebuff Sharon's efforts to build a national unity coalition, the prime minister is likely to seek a majority with smaller, ultra-nationalist and ultra-Orthodox parties, reinforcing opposition to a U.S.-endorsed peace plan calling for a halt to Jewish settlements in the West Bank and Gaza Strip and, eventually, a Palestinian state in the two occupied territories.

Palestinian officials expressed deep reservations about Sharon's intentions in a second term. Yasser Arafat's communications minister, Yasser Abed Rabbo, said the Israeli public bought the right wing's "illusion that it could bring peace and security with an iron fist."

-- John Ward Anderson

and Molly Moore

Economic Growth Drops

Sharply in Fourth Quarter

U.S. economic growth dropped sharply in the final three months of last year as cautious consumers, worried about job prospects and the possibility of war, held back on spending while business investment remained weak, the Commerce Department reported.

The gross domestic product, a measure of all goods and services produced, rose at only a 0.7 percent annual rate in the fourth quarter, after adjustment for inflation. That was the smallest gain since the string of three consecutive quarterly declines in the GDP during the recession that began in March 2001.

The economy has been growing in fits and starts since then, jumping with no-interest financing for auto sales, for example, but unable to gain sure footing.

Consumer spending, at present about 70 percent of the economy, grew at only a 1 percent annual rate in the fourth quarter, the smallest in a decade.

-- John M. Berry

Budget Office Forecasts

$199 Billion Deficit This Year

The Congressional Budget Office forecast a larger-than-expected deficit of $199 billion for this fiscal year, the biggest shortfall since 1994 and a figure more than a third larger than the deficit projected five months ago.

The CBO said it does not expect the federal government to return to surplus until 2007. And the nonpartisan agency cautioned in its annual economic outlook that its projections could be worsened by new tax cuts and a war with Iraq.

The new numbers underscored how rapidly the government's fiscal condition has deteriorated in just two years because of the struggling economy, new spending on defense and homeland security and tax cuts. In 2001, the government ran a $127 billion surplus, its fourth consecutive year in the black.

-- Jonathan Weisman