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Governors worried by healthcare bill costs

Say states could get new Medicaid burden

Governor Bill Richardson of New Mexico said, “I’m personally very concerned about the cost issue, particularly the $1 trillion figures being batted around.’’ Governor Bill Richardson of New Mexico said,

“I’m personally very concerned about the cost issue, particularly the $1 trillion figures being batted around.’’ (Rogelio V. Solis/Associated Press)

By Kevin Sack and Robert Pear
New York Times / July 20, 2009
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BILOXI, Miss. - The nation’s governors, Democrats as well as Republicans, voiced deep concern yesterday about the shape of the healthcare bill emerging from Congress, fearing that the federal government is about to hand them expensive new Medicaid obligations without providing the money to pay for them.

The role of the states in a restructured healthcare system dominated the summer meeting of the National Governors Association here this weekend - with bipartisan animosity voiced against the Obama administration’s plan during a closed-door luncheon Saturday and in a private meeting yesterday afternoon with the secretary of health and human services, Kathleen Sebelius.

“I think the governors would all agree that what we don’t want from the federal government is unfunded mandates,’’ said Governor Jim Douglas of Vermont, a Republican who is the group’s incoming chairman. “We can’t have the Congress impose requirements that we are forced to absorb beyond our capacity to do so.’’

The governors’ backlash creates yet another healthcare headache for the Obama administration, which has tried to recruit state leaders to pressure members of Congress to wrap up their fitful negotiations. In its effort to win support for the health plan, the administration dispatched Sebelius - who was governor of Kansas before she joined the cabinet in April - and the federal Medicaid chief, Cindy Mann, to meet here with the governors. Meanwhile, other administration officials spent yesterday pushing the proposal on television talk shows.

President Obama also plans to address questions about his health plan at a news conference Wednesday.

Although many governors said significant change was needed, they said their deep-seated fiscal troubles made it a terrible time to shift costs to the states. With the recession draining states of tax revenues even as their Medicaid rolls are surging, the National Governors Association projects that states will face aggregate deficits of $200 billion over the next three years.

Because the states and the federal government share the cost of Medicaid coverage for low-income people, any increase in eligibility levels, benefits, or payments to doctors would impose new costs on the states unless Washington agrees to absorb them entirely. In at least one of several bills circulating in Congress, the states would eventually pick up a share of the new costs, and the governors fear they cannot count on pledges in other bills that they will be held harmless.

It was unclear whether the governors’ association would put together a statement expressing its dismay, at least partly because half of the governors did not attend. Many, including the group’s chairman, Governor Edward G. Rendell, a Pennsylvania Democrat, stayed home to deal with budget crises.

Some of the group’s most recognizable names - Arnold Schwarzenegger of California, Sarah Palin of Alaska, Charlie Crist of Florida, Tim Pawlenty of Minnesota, Bobby Jindal of Louisiana, David Paterson of New York, Jennifer M. Granholm of Michigan, and Mark Sanford of South Carolina - were not here.

But the sentiment among those who were could not have been more consistent, regardless of political party. The governors said in interviews and public sessions that the bills being drafted in Congress would not do enough to curb the growth in health spending. And they said they were convinced that a major expansion of Medicaid would leave them with heavy costs.

They are already anticipating large gaps in Medicaid financing after 2010, when stimulus money will no longer be available. And they point out that Medicaid already suffers from low payment rates to healthcare providers, discouraging some doctors and hospitals from accepting beneficiaries. If Medicaid is expanded, states would almost surely have to increase payments to doctors to encourage more of them to participate.

Governor Phil Bredesen, a Tennessee Democrat, said he feared Congress was about to bestow “the mother of all unfunded mandates.’’

“Medicaid is a poor vehicle for expanding coverage,’’ said Bredesen, a former healthcare executive. “It’s a 45-year-old system originally designed for poor women and their children. It’s not healthcare reform to dump more money into Medicaid.’’

He was far from alone. “As a governor, my concern is that if we try to cost-shift to the states, we’re not going to be in a position to pick up the tab,’’ said Governor Christine Gregoire of Washington, a Democrat.

“I’m personally very concerned about the cost issue, particularly the $1 trillion figures being batted around,’’ said Governor Bill Richardson, the New Mexico Democrat who served in the Clinton Cabinet and ran for president against Obama.

Administration officials said they did not see the governors’ concerns as a major impediment to passage of the legislation. Asked about the concerns, Peter R. Orszag, director of the White House Office of Management and Budget, made two points. First, he said, one of Obama’s overriding goals was to reduce the rate of growth of health costs, and that would benefit states, by relieving pressure on their budgets. In addition, he said, some versions of the legislation, including the House bill, could slightly reduce state spending on Medicaid and the Children’s Health Insurance Program the next 10 years.

Many governors expressed frustration that the prolonged negotiations in Washington had made it difficult to gauge the potential impact on their budgets.

“There’s a concern about whether they have fully figured out a revenue stream that would cover the costs, and that if they don’t have all the dollars accounted for, it will fall on the states,’’ said Governor Bill Ritter Jr., a Colorado Democrat.

Under the proposals before Congress, Medicaid eligibility would be based solely on income, without regard to other factors that have historically been used to decide who qualifies.

Under the House bill, Medicaid would be expanded to cover all non-elderly people with incomes at or below 133 percent of the poverty level, or $29,300 for a family of four. The federal government would pay 100 percent of the costs for those newly eligible. Medicaid would also cover newborns, for up to 60 days after birth, if they did not have insurance from other sources.

The Congressional Budget Office estimates that 11 million additional people would receive coverage through Medicaid under the House bill, and that it would increase federal Medicaid spending by $438 billion over 10 years. Medicaid thus accounts for a huge share of the bill’s effects: about 40 percent of the cost and 30 percent of the people who gain coverage.

In the latest draft of the Senate Finance Committee’s bill, still being written, the federal government would pick up the extra costs for perhaps five years, but states would then have to pay their normal share. On average, the federal government pays 57 percent, and states pay 43 percent.

One of the proposals considered last week by the Finance Committee would have encouraged states to issue bonds to cover the costs of expanding Medicaid. Governors in both parties revolted, trumpeting their opposition in a conference call last week with Senator Max Baucus, Democrat from Montana who leads the committee.

“There’s strong bipartisan opposition to the idea of the states’ issuing bonds to pay for operational expenses,’’ said Governor Haley Barbour of Mississippi, chairman of the Republican Governors Association. “One governor said it’d be like taking out a mortgage to pay the grocery bill.’’

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