Republican Governors Seek Medicaid Flexibility

Republican governors are renewing a push for more flexibility in running Medicaid health programs for the poor, urging Congress to roll changes into a debt- cutting deal federal lawmakers are negotiating.

Twenty-nine Republican governors asked for more independence from the U.S. in designing and running programs in a June 13 letter to Senator Orrin Hatch of Utah, the top Republican on the Senate Finance Committee. Medicaid is being expanded as part of the 2010 U.S. health-care overhaul.

“As federal funding has expanded, so has federal control,” the letter said. “States should not have to seek waivers to manage their unique programs.”

States and the federal government run Medicaid, with the U.S. approving changes in eligibility standards by granting waivers from national law. Without more flexibility, Medicaid -- among the biggest expenses for states -- is draining budgets and “crowding out other essential services” including education, public safety and public health, the governors said.

President Barack Obama’s administration has issued several directives it said were aimed at giving states more options to design their own programs. A February letter from the U.S. to states raised the prospect of dropping some adults with incomes exceeding 133 percent of the federal poverty level from the program to close budget shortages.

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The U.S. Centers for Medicare and Medicaid Services is “committed to giving states the flexibility they need to administer their Medicaid programs while ensuring protections for patients,” said Brian Cook, a spokesman for the agency.

Hatch, in prepared remarks for delivery at the Heritage Foundation in Washington today, said Medicaid had expanded too far past its original role as a safety net program for the poor.

“It has turned into substitute health insurance for nearly one-quarter of the population,” he said in a copy of his remarks provided to Bloomberg. “Not only can the states and the federal government not afford such a massive program, but as currently structured it provides nowhere near the level of care that it should. Medicaid is like every other government program. There is fat to be cut.”

Republicans are pushing for the Medicaid changes as part of negotiations to lower federal spending and raise the U.S. statutory borrowing limit, known as the debt ceiling. Medicaid covers about 60 million low-income people, about half of whom are children, according to the nonprofit Kaiser Family Foundation in Menlo Park, California. Medicaid cost $339 billion in 2009.

A House Republican budget plan by Representative Paul Ryan of Wisconsin, chairman of the chamber’s Budget Committee, would cut $771 billion across a decade by converting the program into a series of grants the U.S. awards to states to run Medicaid as they see fit.

Democrats have criticized that approach, saying it would leave poor people vulnerable by cutting benefits and eligibility. Senate John Rockefeller, a West Virginia Democrat, has said he knows of 41 senators who will oppose any effort to significantly cut the program.

Hatch is not part of the group negotiating the debt deal. The Finance Committee does have jurisdiction over Medicaid in the Senate. In the speech, he also criticized a regulation issued in April that would limit states’ ability to set payment rates to doctors and hospitals.

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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