Governors Pitch Bipartisan Medicaid Plan on Hill


Governors unveiled their bipartisan proposals to reform Medicaid for the first time on Capitol Hill Wednesday (June15) but met skepticism from both sides of the aisle, foreshadowing political schisms over how to fix the nation's health-care safety net.

Despite governors' insistence to talk policy and not budget savings, Republicans on the U.S. Senate Finance Committee pressed for details of how the plan would achieve the $10 billion in Medicaid cuts over five years to which Congress is now committed. Democrats, meanwhile, expressed worries that the plan would deprive the nation's most impoverished citizens of basic health care.

The appearance before Congress by Govs. Mark Warner (D) of Virginia and Mike Huckabee (R) of Arkansas, the chairman and vice chairman of the National Governors Association, kicked off a pivotal stage in which the states, the Bush administration and Congress will try to meld ideas for reining in the explosive growth in costs in Medicaid, the state-federal program that covers 53 million low-income and disabled Americans.

The governors released a 14-page proposal that disclosed new details of their strategy to overhaul the $330 billion program, which now consumes an average 22 percent of state budgets. The plan, hammered out by an 11-governor task force and subject to approval by all 50 of the nation's governors at an NGA conference in July, seeks to stem the steep run-up in Medicaid costs without lopping people from the program's rolls.

The difficulties of negotiating a solution to Medicaid's woes quickly showed up in the clash between the governors' bipartisan approach and rifts on display in Congress, where Democrats have boycotted a commission to study Medicaid and deficit-conscious Republican leaders have pushed through a commitment to trim Medicaid by at least $10 billion over five years.

"We may be the only bipartisan game in town," Warner told reporters before the hearing.

Warner and Huckabee, who also testified before the House Committee on Energy and Commerce , hammered repeatedly on two major themes: that states are bearing the brunt of the rising cost of Medicaid and that the NGA proposal should be given significant weight because it represents a bipartisan consensus among the nations' governors.

Since earlier this year, when President Bush proposed the first cuts in entitlement programs since 1997, governors have been adamant that the debate over Medicaid reform should be driven by policy, not budget numbers.

In addition to taking their proposals to Congress, the governors also said they plan to forward them to a nascent commission headed by U.S. Department of Health and Human Services Secretary Michael Leavitt that is looking for short- and long-term Medicaid savings. Leavitt's commission is slated to tackle long-term Medicaid reforms in the fall.

Specifically, the governors' proposals call for a handful of;preliminary fixes for Medicaid, including:

  • Giving states broad discretion to establish premiums, deductibles and co-payments for all Medicaid services and populations. Governors propose a safety valve to ensure that beneficiaries pay no more than 5 percent of their total family income.
  • Lowering Medicaid's drug costs, in part by increasing the rebates that states collect on brand-name and prescription drugs and by making the drug-pricing processes more transparent. The Bush administration supports efforts to decrease drug costs, but governors are concerned President Bush's plan would place the burden solely on pharmacies, instead of requiring drug companies to reduce costs.
  • Closing loopholes that let elderly people intentionally transfer their assets to family members or place wealth in trusts or annuities so they can qualify for taxpayer-funded care through Medicaid. The governors also propose providing incentives for "reverse mortgages" so older people can tap into real-estate equity to pay for their own long-term care. Closing the loopholes has the support of the Bush administration.
  • Enacting federal reforms to protect states that attempt Medicaid reform from legal action.

Although governors have been cautious not to attach cost estimates to elements of their proposals for fear that they could provide ammunition for even deeper Medicaid cuts this year, Huckabee did estimate that changing the rebate process for prescription drugs could save state and federal governments $2.6 billion.

>Huckabee said that governors hope all of their short-term recommendations would be adopted by Congress this year but that judicial reform --if nothing else -- would lay the foundation for states to explore more creative ways to deliver services to the needy. Arkansas is one of the states -- along with Mississippi and Tennessee -- that recently landed in federal court after attempting Medicaid innovations. Lawsuits have a chilling effect on state innovation in the Medicaid arena and also cost states money, sometimes more than negating the savings garnered by the reform, Huckabee said.

In the long run, governors are urging that Medicaid's focus shift towards promoting wellness and preventing illness, rather than on treating people once they are sick, typically a costlier endeavor.

The NGA proposal also targeted four other pieces of the nation's health-care system with the dual purpose of slowing the explosive growth of new Medicaid recipients while reducing the numbers of the nation's uninsured. Governors are backing initiatives to curb Medicaid-paid costs for long-term care, strengthen private forms of health insurance, enhance the overall quality of the nation's health-care system and protect states from losing large sums of money in 2006 when Medicare's new prescription drug benefit kicks in for the elderly.

At several points during the hearing, discussions of Medicaid reforms devolved into contentious debate over the merits of making permanent the federal tax cuts enacted in 2001 -- another major issue before Congress this year.

"This is the only real safety net that we have. That's why we have to treat it specially. ... You wouldn't have a Medicaid problem if we hadn't had those tax cuts," said Sen. John Rockefeller (D-W.Va.).

Committee chairman Charles Grassley (R-Iowa), meanwhile, said that the five-year $10 billion Medicaid cut Congress is ordering represents a drop in the bucket in terms of the overall program.

"It's just ludicrous to think that in a program such as Medicaid we can't find 1 percent savings some way," Grassley said.

Governors stressed that their proposal should be viewed as a launch pad for discussion and not a finished product. But some lawmakers, such as Sen. John Kerry (D-Mass), expressed frustration that the process of making Medicaid sustainable in the long term has plodded along at a snail's pace.

The Senate panel also heard testimony from Alan Weil, executive director of the National Academy for State Health Policy; Jeanne Lambrew, senior fellow at the Center for American Progress, and Stuart Butler, vice president for domestic and economic policy studies at the Heritage Foundation.


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