Governors Wary of White House Medicaid Proposal

The nation’s governors said clearly Monday that they wanted more flexibility to run their Medicaid programs but stopped short of endorsing President Bush’s proposed cap on federal aid as the trade-off.

Though squeezed by huge budget deficits driven in part by skyrocketing Medicaid spending, the governors gave a cool reception to a Bush proposal that would give the states an additional $12.7 billion in funds over seven years and then reduce projected federal funding by an equal amount in the next three years.

“Anytime anyone says they are going to give you more money now and less later, that’s a red flag,” California Gov. Gray Davis said.

The jostling over Medicaid showcased some of the political resistance the administration faces as it attempts to restructure the government’s largest social programs, which also include Medicare and Social Security.

If the administration cannot get governors to jump at a deal offering them billions of dollars upfront, its proposals are even less likely to make it through the narrowly divided Senate.

Health and Human Services Secretary Tommy G. Thompson appeared to win some cautious Democratic converts to the administration’s Medicaid proposal when he told the governors at a White House meeting Monday morning that funding for some of Medicaid’s neediest recipients would not be capped.

But at a public session Monday afternoon, Thompson and his staff could not say with certainty whether increased federal payments for “mandatory” beneficiaries would leave less money available for “optional” benefits. Thompson himself gave conflicting answers.

The law requires states to provide basic medical care for some poor residents, mainly families with children. States have the option of covering more people with wider benefits.

Most include the disabled and elderly poor in their Medicaid programs and cover prescription drug costs for all beneficiaries.

As a result, “optional” benefits now account for two-thirds of Medicaid spending, and Bush’s proposal has raised fears that they will have to be cut as health inflation and a growing population of poor families drive up the cost of “mandatory” benefits.

Although the governors will be influential, it will ultimately be up to Congress to accept or reject Bush’s proposal.

Rep. John D. Dingell (D-Mich.) repeatedly exhorted the governors to “read the fine print” of Bush’s proposal.

“You don’t have to agree to this proposal until you’ve read it,” he said. “It is not in writing.”

One person familiar with the governors’ deliberations, who spoke on condition of anonymity, later said, “There has been no paper given to anybody on this. No one’s seen anything.”

At the end of the day, however, the National Governors Assn., holding its annual meeting here, agreed unanimously to form a bipartisan task force to examine a wide range of Medicaid proposals that would give states more flexibility to design their own programs.

Thompson had asked the governors to form the task force, said Republican Gov. Dirk Kempthorne of Idaho, vice chairman of the association.

More specifically, the governors called on the federal government to assume full financial responsibility, including the cost of prescription drug coverage and nursing home care, for so-called dual eligibles -- seniors enrolled in Medicare who are covered by Medicaid because of their low incomes.

“That’s major,” Kempthorne said in an interview. “We could retain the savings and use them for other health-care needs.”

In the past, the governors’ association has estimated that spending on services for dual eligibles consumes as much as one-third of Medicaid’s combined federal-state budget of roughly $271 billion.

Arkansas Gov. Mike Huckabee, a Republican, cited a different figure Monday, saying 12% of states’ Medicaid budgets are spent on dual eligibles, with half of that going to prescription drug coverage.

Using Huckabee’s estimate of state costs, moving low-income seniors to the Medicare rolls could save the states as much as $15 billion a year.

The states face a combined deficit of $40 billion to $50 billion this year and a projected shortfall of $65 billion to $80 billion next year.

While the Bush administration has proposed committing roughly $400 billion over 10 years to a Medicare prescription drug benefit, it is unclear where the money to cover long-term care and other services for low-income seniors would come from.

Indeed, the governors came away from their White House meeting with one overriding message: Don’t look to the president to help the states find new money for their fiscal problems.

“We did not receive a great deal of encouragement,” said Iowa Gov. Tom Vilsack, a Democrat.

Yet governors from both parties were equally clear on a related point: They need more money from Washington for homeland security and education.

“There’s a need for the federal government to step up and help us with the mandates they give us,” said Ed Rendell, Pennsylvania’s Democratic governor. “We’re trying to be realistic. We do understand there’s a federal deficit. But these mandates were given to us by the federal government.”

A statement informally agreed upon by the governors Monday and expected to be ratified today did not cite any dollar amounts but called on the federal government to “provide funding for federal mandates and programs.”

On the issue of homeland security funding for police, fire and emergency personnel, Bush told the governors he shared their pain.

“That’s a disappointment, a disappointment when the executive branch gets micromanaged by the legislative branch,” Bush said. He encouraged governors to lobby Congress for more first-responder money.

California Gov. Davis said in an interview he had previously told Homeland Security Secretary Tom Ridge that the state needed an additional $500 million to fund its anti-terrorism activities.

But it was Medicaid reform that generated the most activity Monday.

Medicaid, which covers some 45 million low-income Americans, eats up as much as one-quarter of some state budgets and is the fastest-growing state expense. Last year, 26 states cut Medicaid benefits, and 42 states have said they will cut benefits this year.

Administration officials have portrayed their reform proposal, which would be voluntary to the states, as a boon for tight budgets.

By encouraging states to be “innovative,” the proposal would allow governors to cut some optional benefits, require co-payments for services and otherwise save money, officials say. It might allow states to offer basic services to more people.

But New Mexico Gov. Bill Richardson, Energy secretary in the Clinton administration, said, “I don’t think this plan is for my state the answer.”

Even Rep. Ed Whitfield (R-Ky.) offered only a general endorsement of increased flexibility for the states.