Governors, White House
Deadlocked on Medicaid

May 27, 2003
Governors and the Bush Administration are making little progress on finding a new blueprint for Medicaid. President Bush wants to set strict limits on the federal funds each state gets for its Medicaid program over the next decade but governors of both parties are resisting the idea.

The governors fear that Bush's plan leaves the states vulnerable to catastrophic budget overruns that could occur because of natural disaster, terrorism, epidemics, economic downturns and the development of expensive new drugs and therapies.

New York is often cited as an example. It added more than 300,000 people to its Medicaid rolls following the Sept. 11, 2001 terrorist attacks.

Even Florida Gov. Jeb Bush, the president's brother, has expressed reservations about the plan, The New York Times reported. The governors and the White House agree on only one thing: Medicaid costs are out of control.

Medicaid is the nation's largest health insurance program. It finances one-third of all births, covers health care for one-fourth of all children and finances care for two-thirds of nursing home residents.

Medicaid is the fastest-rising item in most states' budgets, increasing 13 percent last year, a year when state tax revenues were flat or declining.

According to the Times, the governors' top priority is getting the federal government to pay the full cost of caring for six million low-income elderly people who qualify for both Medicare and Medicaid. People who qualify for both amount to 12 percent of Medicaid recipients and more than 30 percent of state Medicaid spending.

The governors would also like to have more freedom to manage the program in their state and some say they would be willing to accept more financial risk in return for that flexibility.

Advocates for children and the disabled are frightened by all of the options. Given the political clout of older Americans, they fear that cutbacks will hit hardest at younger beneficiaries. In most cases, Medicaid provides a more extensive package of benefits than commercial health insurance policies and many governors are hoping they get the chance to begin trimming benefits.

House Republicans, led by Rep. Billy Tauzin (R-La.) and Heather Wilson (R-N.M.) say they will begin drafting legislation to overhaul Medicaid. But those efforts may falter if the governors are unable to reach consensus, in which case the Bush Administration could impose its plan.