Governors’ Budget Plan Asks Wider Role on Medicaid

Seeking to break the stalemate over the federal budget, the nation’s governors proposed Tuesday that they be given much broader authority to run Medicaid as they see fit, while still preserving a guarantee of health care benefits for the needy.

The governors also compromised on a bipartisan plan to overhaul welfare, then called on President Clinton and Congress to adopt their new accords as the basis of a deal on all the issues--including tax cuts and Medicare savings--that have brought budget talks between the White House and Republicans to a standstill.

The Clinton administration and GOP leaders responded by immediately expressing interest in the governors’ broad if somewhat vague prescriptions. Clinton told the governors: “This is a huge step in the right direction.” And House Speaker Newt Gingrich (R-Ga.) announced that Congress would conduct prompt hearings on the proposals.

Yet lawmakers were divided over whether the governors had come up with ingredients that would somehow transform the bogged-down budget process.

Under the governors’ Medicaid blueprint, “the nation’s most vulnerable populations” would continue to receive coverage. These include pregnant women and children up to age 12 whose families are under the poverty line, or, in some cases, somewhat above it.

At the same time, states would be given new flexibility in a host of areas, some potentially controversial, such as setting disability requirements for Medicaid coverage.

The welfare proposal is highlighted by $4 billion extra for child-care funding to help parents comply with work rules and an extra $1 billion to help states hit by recession.

While the governors’ proposals almost certainly would not be adopted without extensive changes, their agreements are viewed as significant because they were arrived at through bipartisan negotiation at a time when Republicans and Democrats in Washington remain stubbornly apart.

The Medicaid and welfare proposals, which were approved unanimously, also have weight because the governors essentially run those programs in their states. Medicaid and welfare reform have been at the center of the unyielding philosophical dispute that has stalled the fiscal 1996 budget more than four months beyond the Oct. 1 date it was to take effect.

“I believe this will have a profound impact on the budget process,” said Utah Republican Gov. Mike Leavitt. He said that the governors had succeeded in creating both “a keystone and neutral ground” to help the White House and Congress move ahead in their tortured budget talks.

Senate Majority Leader Bob Dole (R-Kan.) said that, if the Medicaid and welfare deals hold up, it would be “a big, big plus” for the cause of achieving a political compromise on the budget.

“I think very frankly this puts a lot of pressure on the leadership of Congress and the president of the United States--a good kind of pressure,” Dole told the governors, near the end of their four-day meeting in Washington. “The fact that you’ve come together ought to be an inspiration to us.”

Gingrich, who was in Southern California to attend Tuesday night’s birthday celebration for former President Reagan, called the governors’ proposals an “impressive, historic first step.”

The speaker interrupted the taping of a “Murphy Brown” episode for a briefing on the plan in a conference call with the governors. He said that the House will pass 80% to 90% of the proposal.

Rep. E. Clay Shaw Jr. (R-Fla.), chairman of the human resources subcommittee of the Ways and Means Committee, will begin hearings on the proposals in two weeks, he said.

“I would think that by early March we could get this through the House and into the Senate,” Gingrich said.

But later, after a delegation of governors visited Capitol Hill to meet with a bipartisan group of legislators, some participants emphasized the vague nature of the proposals.

“All of us want to see how they flesh this out,” said Sen. Edward M. Kennedy (D-Mass.). The proposals are not headed for a fast track in the typically slow-moving Senate, he added. “We’re going to take our time.”

In fact, the governors acknowledged the precarious nature of their own compromise, particularly on the sensitive issue of Medicaid, which hard-line Republicans have wanted to turn into a state program financed in part by federal block grants. Important determinations have yet to be made on some of the most basic issues affecting who would qualify for health care benefits.

It was unclear, for example, what sort of services states would be required to provide to abused children, or where the governors stand on a provision affecting coverage of certain elderly poor.

As a result, the process of translating general statements of principle into legislative fine print adds great uncertainty to the six-page document that the governors circulated Tuesday.

“This is a fragile kind of compromise,” acknowledged Democratic Colorado Gov. Roy Romer. “We’ve got to understand that. It’s kind of like helping a baby learn to walk.”

In a concession to Democrats, the governors recommended adding $4 billion in child-care funding for welfare, designed to dovetail with work requirements that would force welfare parents out of the house. The governors also would preserve school nutrition as an entitlement program.

They also would include certain features sought by GOP conservatives. These include restrictions on food stamps and granting states the option of restricting welfare benefits when a family has more children while on welfare.

The plan also would give states flexibility in establishing work requirements for parents with young children and allow job-search activities to count in part toward fulfilling work requirements.

“The welfare proposal approved today by the National Governors’ Assn. contains very serious problems,” the Center on Budget and Policy Priorities, a liberal Washington research center, said in a statement. The plan is “much less satisfactory” than tentative welfare agreements reached in budget negotiations between the White House and Congress, the statement said.

At the same time, some congressional conservatives were dissatisfied with the proposal, arguing that the $4 billion recommended for child care was exorbitant.

Medicaid proposals also sparked dispute, because of a lack of clarity in the governors’ definitions as well as the uncertainties that would arise from new state control over the program.

For example, states would gain new power to define who qualifies for disability benefits subject to a final say from Washington. Currently, the federal government establishes basic, minimum criteria that all states must follow.

“I think that has real implications for some of the highly disabled populations, such as children with mental retardation and people with AIDS,” said Diane Rowland, executive director of the Commission on the Future of Medicaid.

“One state could decide that people with HIV-AIDS are included and another state could decide that they aren’t.”

States also would have new power to deny Medicaid coverage to certain children. Current law dictates that all children under 18 who are below the federal poverty line--$15,150 for a family of four--must be covered by Medicaid by 2002; the governors’ proposal would change that age limit to children under 12.

Despite such brewing controversies, die-hard advocates of a balanced budget saw in the governors’ plan a new opportunity to salvage the deadlocked talks on the budget.

Times staff writers Janet Hook in Washington and Jon Markman in Burbank contributed to this story.