As expected, the National Governors' Association passed a resolution at its meeting in Washington last week opposing per-capita caps on federal Medicaid spending.
The move sets up a showdown with President Clinton, who proposed such caps in his fiscal 1998 budget plan, and some congressional Republicans, who view the caps as a necessary cost-control evil. Under the White House budget, Medicaid reductions would total $22 billion over five years, and about $8 billion of that would come from the Medicaid per-capita caps.
The NGA also came out against federal regulation of provider-sponsored organizations, one of the primary tenets of the two bills before Congress. The bills would allow provider networks to contract directly with Medicare under federal guidelines rather than state regulations.
After four years, a state could take over regulation of PSOs if its rules were identical to federal guidelines. The NGA says state insurance commissioners should have authority over PSOs as they do over HMOs.
The governors also called for increased flexibility to allow them to cover new Medicaid beneficiaries under a basic benefits package, even though other beneficiaries receive additional benefits. Under current law, all beneficiaries must receive essentially the same benefits.
While the NGA officially opposed any Medicaid spending caps, a number of governors said they understood the need to control spending and would consider caps if states were allowed more leeway in running their Medicaid programs.
"You can't just have uncontrolled costs; you have to keep it under control some way," said Colorado Gov. Roy Romer, a Democrat.
Romer said he would be willing to consider a per-capita cap plan if states were given enough flexibility to manage the program.
"I warned (the NGA) that (its resolution) was pretty absolute language," Romer said.
Congressional Republicans seem split on the issue. Senate Majority Leader Trent Lott (R-Miss.) told the governors he opposed per-capita Medicaid spending limits. Lott suggested congressional Republicans would again seek to end the Medicaid entitlement through a federal block grant as they did in 1995.
However, Sen. Phil Gramm (R-Texas), chairman of the GOP health task force and the Senate Finance health subcommittee, said he would support the White House proposal "if it is accompanied by language to give the states the flexibility to run the program when the cap is in effect.
"I think a cap will drive the reforms that we want," Gramm added.