Obama Wants to Relax Medicaid Rules—But Not Too Much

| Mon Feb. 28, 2011 1:21 PM EST

Trying to outflank a potential GOP push to gut Medicaid, President Obama announced Monday that he'll throw his weight behind a change to federal health reform that would make it easier for states to opt out of some of the new rules. Obama embraced an amendment first proposed by Sen. Ron Wyden (D-Ore.) and Scott Brown (R-Mass.) that would allow states to petition the federal government to exempt them from some of the Medicaid requirements beginning in 2014, rather than 2017. The New York Times explains:

The legislation would allow states to opt out earlier…if they could demonstrate that other methods would allow them to cover as many people, with insurance that is as comprehensive and affordable, as provided by the new law. The changes also must not increase the federal deficit. 

If states can meet those standards, they can ask to circumvent minimum benefit levels, structural requirements for insurance exchanges and the mandates that most individuals obtain coverage and that employers provide it. 

As the Times points out, it's the first significant change to federal health reform that Obama has supported. The move is meant to address complaints from state officials that expansion of Medicaid under federal health reform and rising health care costs are killing state budgets. But it's unlikely to quell objections from both Republican governors and members of Congress, who are proposING far more radical changes to the federal health program for the country's poorest. 

While he's been pushing to curb union benefits and collective bargaining rights in Wisconsin, Gov. Scott Walker also wants to take a buzzsaw to Medicaid—permanently. At the National Governors Association's winter meeting this weekend, Walker—the new chair of the group's health committee—said that he wanted to push for a "block grant" system for Medicaid. As I reported recently, the radical proposal would likely slash both federal and state spending on the program drastically. Other Republican governors at the meeting echoed Walker's call. And it's likely to embolden congressional Republicans who've been quietly preparing to gut the program by making it far easier for states to pare benefits and kick beneficiaries off the rolls.

Obama's proposed change, by contrast, would prohibit states from providing less comprehensive care or covering fewer people—a constraint that the GOP will certainly resist. Democrats, anticipating such objections, are already calling out the GOP for wanting to ambush the program. Asked about the GOP block grant proposal this weekend, Gov. Dan Malloy (D-Conn.) told Politico: "Look at who is asking? People who are against the program. Who is saying don't do block grants? People who support the program. The reason people who don't support the program want block grants is they want to kill the program."

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