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Schwarzenegger Protests Cost of Medicaid Expansion in Overhaul

By Jane Norman, CQ HealthBeat Associate Editor

December 23, 2009 –Could California Gov. Arnold Schwarzenegger be ready to bail on the health care overhaul?

Schwarzenegger, who’s gained widespread attention as a Republican willing to support President Obama’s efforts to overhaul the nation’s health care system, has written congressional leaders saying the bill’s Medicaid expansion would cost his state an additional $3 billion to $4 billion annually that it cannot afford. He has also made numerous remarks in the California media in recent days warning of the bill’s cost to the state.

His letter comes after Senate Democratic leaders gave an assurance to Democratic Sen. Ben Nelson of Nebraska that all the costs of Medicaid expansion in his home state will be covered. Under the Senate bill, the other 49 states will initially have their Medicaid expansion costs picked up by the federal government also, but only through 2016. After that, they’ll have to pay about 10 percent of the costs of the expansion.

The promise was made to win Nelson’s crucial vote so the health care bill (HR 3590) could pass in the Senate, but it has hardly gone unnoticed by other recession-struck states struggling with gaping holes in their budgets.

To help reduce the ranks of the uninsured, the measures in both the House and Senate will expand Medicaid coverage to new populations including childless adults, adding an estimated 2 million new enrollees in California. It’s known as MediCal there.

Schwarzenegger said he has “great appreciation” for Democratic leaders’ drive to pass legislation. “In fact, I am one of the only Republican elected officials in the country to publicly support the president’s health care reform efforts,” he wrote in the Dec. 22 letter to House Speaker Nancy Pelosi, D-Calif., and members of the state’s congressional delegation.

But he said when he was asked for his support for the overhaul, he was assured that there would not be increased costs for California or unfunded mandates. Under all scenarios, Schwarzenegger said it appears that California will be expected to come up with $3 billion to $4 billion a year.

“This crushing new burden will be added to a safety net that is already shredding under billions of dollars in unfunded federal mandates that we are struggling to meet,” Schwarzenegger wrote.

“Medicaid is a partnership program between the federal government and the states. As the partner responsible for implementing this program, I am telling you that our Medicaid program is already at the breaking point, and if federal health care reform is passed without addressing the underlying faults in the system, health care reform will fail.”

He said he still supports attempts to bring change to health care. “However, if Congress fails to address the existing unfunded mandates and adds yet another layer, federal health care reform could collapse the very safety net system it seeks to expand,” he said. California is locked into eligibility standards and benefit levels far more costly than those in other states, Schwarzenegger said.

California, for example, now covers parents at up to 106 percent of the federal poverty level while other states’ coverage is less generous, and federal rules prevent the state from rolling back that standard when faced with lower revenues, he said.

According to the Los Angeles Times, Schwarzenegger also is seeking roughly $8 billion in federal assistance to help the state out of its precarious financial situation, which includes a budget deficit exceeding $20 billion.

Meanwhile, the issue of Nebraska’s full federal funding of the Medicaid expansion is heating up. Attorneys general in at least ten states held a conference call Tuesday to consider a legal challenge to the provision, the New York Times reported.

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