The nation's governors roundly rejected the Bush administration's proposed Medicaid reforms last week, just as HHS Secretary Tommy Thompson headed to Capitol Hill to try to sell the measure to skeptical lawmakers.
Resistance has intensified since the plan was announced Jan. 31, as opponents warn that state budgets will be strained and the nation's poor will be cut off from care.
Last week, governors in Washington for the National Governors Association's Winter Meeting failed to endorse the proposal.
A report released last week by the Nelson A. Rockefeller Institute of Government found that most states were reluctant to make sizable Medicaid cuts during 2003, often drawing from rainy-day funds to keep their programs intact. But dwindling budgets may trigger bigger cuts in fiscal 2004, including hiring freezes and layoffs to keep services intact. The report said Medicaid spending growth has reached double digits for the first time in more than a decade.
"We're just asking the federal government to live up to federal mandates," said Gov. Thomas Vilsack (D-Iowa).
A few showed support for the Bush plan, including Republican Gov. Mike Huckabee of Arkansas who said states need more flexibility in Medicaid. But others said they could not approve it until more details are released. The rejection was a significant blow to Thompson, a Wisconsin governor for 14 years, who personally tried to rally the governors' support.
Much criticism centered on the proposal's approach of offering lump sums to states in exchange for allowing more flexibility in how states spend Medicaid money. Traditionally, the federal government has paid a fixed percentage of each state's Medicaid expenses, ranging from 50% to 77%.
Thompson tried last week to defend charges that the Bush administration wants to move Medicaid into a "block grant" structure (See editorial, p. 20). "As long as it's mandatory, the federal government continues to pay for it," he told governors last week during a special session on Medicaid.
But lawmakers argued that in the long term, states could see their federal Medicaid dollars diminish under the plan. Critics said if the economy doesn't improve and the Medicaid population increases, states would have to foot any extra Medicaid costs without additional federal help.
Under the Bush proposal, states that volunteer for the new program would be able to make changes to Medicaid without having to get a waiver from the federal government, as is currently required. At the same time, those states would receive additional federal funding (Feb. 3, p. 7).
During the first seven years of the 10-year plan, the federal government would funnel an additional $12.7 billion to states joining the program. In the last three years, though, those subsidies would be reduced by the same amount to make the proposal budget-neutral to the federal government.
At the governors' meeting, Sen. John Breaux (D-La.) cautioned state chief executives to take a long view. Though the proposal calls for additional funding upfront, "cuts the last three years will be greater than the increases during the first seven years," he said.
Rep. John Dingell (D-Mich.) also questioned the validity of differentiating between mandatory and optional populations that states could choose to cover under the proposal. "If you're sick ... your healthcare is mandatory," he said.
Thompson maintained that funding for mandatory populations would increase as the number of beneficiaries does. At a House Energy and Commerce Committee hearing on the 2004 HHS budget, Thompson said: "We are not capping the (Medicaid) program on a per-capita basis."