The GOP's Medicaid Ambush

In the budget battle, Republicans see an opening to roll back health care for the poor.

| Thu Feb. 17, 2011 6:00 AM EST

After President Obama and House Republicans released their budgets this week, deficit hawks complained loudly that neither party was brave enough to tackle out-of-control entitlement spending. Both parties are now vowing that they'll take on entitlement reform, but the political perils of touching Social Security or Medicare have kept any specific proposals from coming forward. Under the radar, however, Republicans are starting to circle around the entitlement program that's received less attention than the others: Medicaid.

Leading Republicans in Washington and in the states have set their sights on the federal health care program for the poor, aiming to slash funding and roll back Medicaid, just as Democrats are preparing to expand it to millions more Americans.

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Republicans' first line of attack is changing federal regulations that prevent states from reducing the number of residents signed up for Medicaid or from creating new barriers to enrollment. "It's the general consensus that we need to give the states much greater flexibility in terms of their caring for their Medicaid population," Rep. Tom Price (R-Ga.) told Mother Jones. "There's going to be a lot of work done on it in the next number of months." And the House GOP has already put the issue on its agenda for next month. Rep. Fred Upton (R-Mich.), chairman of the House energy and commerce committee, told reporters that he would be inviting governors to testify on March 1 about the fiscal impact of Medicaid on their states.

At the hearing in March, Upton explained, a handful of governors would testify about federal rules tied to stimulus money they received to prop up Medicaid. Governors have been howling in protest about the regulations—known as "Maintenance of Effort" rules—which restrict their ability to scale back benefits and pare down the rolls. Though the stimulus funding dry up in July, states still can't change Medicaid eligibility rules due to provisions in federal health reform. Medicaid already consumes an average of 21 percent of state spending, with spending growth continuing to rise—and a massive expansion of the program up ahead under federal health reform.

While both red and blue states have complained about the fiscal burden, Republicans have clamored for the most drastic changes, even threatening to drop out of Medicaid altogether. Arizona has requested a waiver that allow them to drop 250,000 beneficiaries from the program—a move the White House now appears unlikely to block*. In January, 33 Republican governors sent a letter to the White House requesting more flexibility in scaling back the program to ease the pain on state budgets.

A similar movement to scale back Medicaid is also beginning to emerge from the right flank of the Senate. Calling Medicaid "one of the worst health care system[s] we've got," Sen. Tom Coburn (R-Okla.) told Mother Jones that he is currently compiling research on how much Medicaid is costing the states, gathering ammunition to help them scale back the program. The current system "is going to bankrupt all the states—something's got to give," he said. Even more moderate Republicans seem amenable to relaxing the Maintenance of Effort rules in order to give states a bigger hatchet. "Congress could certainly remove the Maintenance of Effort requirement," said Sen. Susan Collins (R-Maine). "We need to look at giving states more flexibility."

Such rumblings have worried progressive advocates, who warn that loosening or repealing the rules could lead states to scale back health care for many of the most vulnerable Americans. In the wake of the 2001 recession, for example, an estimated 1.2 million to 1.6 million Medicaid beneficiaries were thrown off the rolls, according to Edwin Park, co-director of health policy for the left-leaning Center for Budget and Policy Priorities.

But the assault on Medicaid could go even farther: In a budget plan he unveiled last fall, House Budget chair Rep. Paul Ryan (R-Wis.), the GOP's latest wunderkind, proposed a massive reduction in federal spending on the program, reviving a Medicaid "block grant" proposal that had died during the Bush administration. Under the measure, the federal government would dole out a fixed amount of money—rather than a percentage that factored in the size of the pool of beneficiaries—and allow the states to decide for themselves how many people should be eligible and what kind of benefits they should receive. The Congressional Budget Office found that Ryan's Medicaid proposal would "probably require states to provide less extensive coverage."

Coburn said that he'll be working on bringing this proposal to the Senate, and House Republicans are eager to zero in on the issue as well. "We need to have hearings on it," said Rep. Charles Boustany (R-La.), calling the Ryan proposal an "attractive" idea.

There's likely to be a highly wonky debate in Congress over the pros and cons of federal block grants and eligibility rules. Democrats are rushing to come up with their own solutions, readily admitting that there needs to be a solution to the Medicaid crisis that states are facing. But the upcoming debate could also obscure the reality of ultimate objective for many Republicans: Less money for the program, fewer people covered.

"I'm sure that's what [Republicans] are going to do," said Sen. Mary Landrieu (D-La), "and they won't be the first group that, when first the sign of trouble appears, they want to gut programs for the sick, the elderly and the children."

*Update: Sentence about Arizona's waiver request has been added.

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