GOP Governors Seek Leeway to Cut Medicaid Rolls

From The Wall Street Journal:

Republican governors are pressing the Obama administration to make it easier for states to cut Medicaid enrollment, setting up a fight over one of states' costliest programs.

On Friday, 33 Republican governors and governors-elect plan to send a letter to the White House and congressional leaders asking them to remove a part of the health-care overhaul law.

Under the rule, states that drop enrollees from the program would lose the federal money that accounts for the bulk of Medicaid funding, an unthinkable scenario for states staring down unprecedented budget shortfalls in 2011.

"The effect of the federal requirements is unconscionable," the governors wrote. "The federal requirements force governors to cut other critical state programs, such as education, in order to fund a 'one-size-fits-all' approach to Medicaid." The signatories include all 29 of the GOP governors who will hold office this year, plus four who are leaving office soon.

Supporters of the current rule said states shouldn't be allowed to chop millions of poor people from the rolls when the weak economy makes Medicaid coverage critical. They also fear that loosening the rule could undercut the health overhaul, which is designed to expand Medicaid to an additional 16 million Americans starting in 2014.

But states say that swell in enrollment could make the program unmanageable. Another problem for states: An extra $26 billion they got from the federal government last year to prop up Medicaid expires in June.

Medicaid, which provides health insurance and covers nursing-home costs for the poor, has become most states' top spending conundrum. Although the federal government pays 57% on average of states' Medicaid costs, states are straining to cover the other 43% because Medicaid enrollment continues to rise.

Medicaid enrollment rose to 47.8 million people in 2009 from 42.6 million in 2008, according to the Census Bureau. The percentage of Americans on Medicaid is the highest since 1987.

Prevented from paring enrollment, states have cut services, including Arizona's limiting of Medicaid coverage for organ transplants.

In New York, Democratic Gov. Andrew Cuomo is considering a cut of about $2.1 billion in the state's projected spending on Medicaid in the upcoming fiscal year. He has asked union leaders and hospital executives for cost-cutting ideas.

At least a half-dozen states have publicly discussed withdrawing from the Medicaid program altogether because of its expense.

"For most governors, this is the biggest budget problem, and federal mandates are a huge part of that," Mississippi Gov. Haley Barbour said in an interview.

Mr. Barbour, a potential Republican presidential contender in 2012, said lifting the requirement would allow his state to move enrollees to more efficient health programs, and wouldn't necessarily increase the ranks of the state's uninsured.

The Obama administration said it was trying to help states tame rising Medicaid costs. "We understand that states are facing extraordinarily tight budgets, and that's why we supported measures like enhanced" Medicaid funding, said Reid Cherlin, a spokesman for the White House. "We're exploring options to continue to assist states."

Congress would need to pass legislation to approve the change. So far there's no sign that congressional Democrats would give it the support it needs. The health overhaul does contain a provision that allows states with budget deficits to seek permission from the federal government to limit Medicaid eligibility, but only for relatively higher-income adults who are not pregnant or disabled.

Under the current requirement, a state effectively can't change its Medicaid eligibility rules until it has one of the new health-insurance exchanges created by the overhaul law. That's expected to happen in 2014.

States are pressing forward with deep cuts to the few parts of Medicaid they can change without risking losing their federal matching funds. Those including trimming nonessential benefits for adults—such as prescription, vision and dental coverage—and shaving the rates Medicaid pays health-care providers.

Texas estimates that it will cost an additional $9.1 billion to retain its current Medicaid service levels through 2013. If it tried to plug that gap by cutting health-care provider rates, it would have to reduce them by 48%— and that might drive care providers to stop accepting Medicaid patients, according to the governors' letter. Texas Gov. Rick Perry, a Republican, has threatened to pull out of Medicaid.