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Medicaid Expansion Leaves States Asking for Creative Ways to Stretch

March 4, 2011 -- Arizona Gov. Jan Brewer wants to freeze the enrollment of childless adults in Medicaid. Pennsylvania Gov. Tom Corbett has dropped more than 40,000 adults from the state-federal program. The two are among Republican governors demanding Congress give them more flexibility to make changes under the health care program for the poor.

Their requests gained momentum in Congress last week as Republicans promised legislation to help states ease budget crises that governors say will only be exacerbated by the health care overhaul’s expansion of Medicaid.

House Republicans are floating proposals to cull Medicaid’s rolls by converting it into a block grant program—a priority for GOP governors—and tightening eligibility standards, known as maintenance-of-effort requirements, that were included in the health care overhaul.

Democrats and health law advocates are resisting. But President Obama signaled last week that he’s listening when he said he supports bipartisan legislation to move up the date when states could opt out of the health law as long as they meet its goals.

Block grants might not make it through Congress any time soon. The opt-out measure (S 248) sponsored by Democrat Ron Wyden, Ore., and Republican Scott Brown, Mass., also isn’t given much of a chance.

But the debate gives Republicans another chance to air criticisms of the health care law (PL 111-148, PL 111-152). The efforts also show that the traditional federal-state Medicaid partnership is in upheaval. Many Republicans who have taken over statehouses have close ties to Congress and big ambitions beyond their capitals. Ohio Gov. John R. Kasich is a former House Budget Committee chairman. Mississippi Gov. Haley Barbour is a potential presidential candidate.

Democratic governors are struggling as well but are not as openly critical. New York Gov. Andrew M. Cuomo did propose a 2 percent across-the-board Medicaid cut for hospitals and nursing homes. But Massachusetts Gov. Deval Patrick told a congressional panel last week that rising health care costs pose the most problems for his state.

Flexibility has become the buzzword for governors. States determine in general what services to deliver through Medicaid, how care will be delivered and how much providers will be paid. Who is covered, though, is a federal requirement and that’s what they’re complaining about. The health law’s eligibility section requires states to keep their current guidelines for most adults until 2014 and children until 2019.

States that expanded eligibility during better economic times now want to scale it back. Administration officials say they’re reviewing whether they have the legal authority to waive the requirements — but that big of a concession seems unlikely.

Republican governors want federal Medicaid money as block grants that would allow them to manage their own spending. Medicaid will expand in a big way in 2014 when the health law opens the program to nearly all Americans under 65 who earn up to 133 percent of the federal poverty level. Though the federal government will foot the bill for 100 percent of the expansion through 2016, scaling back to 90 percent by 2020, Republican governors say they’re facing staggering costs.

Democrats warn that block grants could lead the vulnerable to lose coverage. California Rep. Henry A. Waxman says Medicaid is “extremely efficient” as it is and spending growth for each enrollee is less than increases in private insurance premiums.

Rep. Joe Pitts of Pennsylvania, the Republican chairman of Energy and Commerce’s health subcommittee, says he will introduce a bill to change the eligibility or maintenance-of-effort rules and make Medicaid a block-grant program. Sen. Orrin G. Hatch, the top Republican on the Finance Committee, bluntly says that block-grant legislation “isn’t going to go anywhere this year,” though Republicans are “trying to get people to wake up and realize that the principles of federalism work better if you get the states really involved.” In line with that, Hatch also will soon introduce eligibility legislation, aides say.

Curbing Medicaid spending is enormously difficult. Just 1 percent of all Medicaid beneficiaries account for 25 percent of all expenditures. The elderly — many in nursing homes — and people with disabilities are the most costly enrollees, even though children and their parents make up most of the program’s population. States asking for waivers to cut costs complain the Centers for Medicare and Medicaid Services is slow to respond, taking a year or more for a green light.

The White House says it’s heard the clamor. Obama asked members of the National Governors Association to name a bipartisan contingent to work with the federal government to lower costs for people who qualify for both Medicare and Medicaid. Teams of officials have been sent to states to comb through Medicaid costs. Obama said the health care law ultimately will rein in costs. “But we understand the pressures you’re under,” he said.

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