Governors Tell Panel Flexibility Essential; GOP Pushes for More Dramatic Changes

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Governors March 1 continued their push for greater Medicaid flexibility to control the program's costs, but Republicans called for far greater changes to achieve those savings.

In testimony before the House Energy and Commerce Committee, Mississippi Gov. Haley Barbour (R) voiced support for one of the more drastic proposals GOP governors have raised--converting the program into a block grant, under which the federal government would give states a set dollar amount for Medicaid rather than paying a percentage of costs.

Barbour said that in exchange for a block grant, states should be given “total flexibility” to manage their Medicaid programs. Under one possible scenario states could agree to a funding cap that would limit their annual increase in federal Medicaid funding to half the national average, according to Barbour.

“We're willing to save the federal government money if they're willing to trust us to run our programs,” he told reporters.

Opponents of block grants say that is precisely the problem, though--a funding cap would shift the financial risk from the federal government to the states, leaving them unable to draw down additional federal dollars in the case of an epidemic or recession. Even in the absence of an emergency, states could find themselves with too little funding and cut back eligibility, benefits, or provider payments as a result.

The panel's Democrats were quick to dismiss the idea of block grants, saying the change would harm vulnerable beneficiaries.

“Calls to block grant, cap, or cut this program under the guise of flexibility and fiscal restraint are shortsighted,” Rep. Henry A. Waxman (D-Calif.), ranking member of the committee, said.

Maintenance of Effort, CMS Responses.

Barbour and Utah Gov. Gary Herbert (R) also raised the issue of the maintenance-of-effort (MOE) provision included in the health reform law, which requires states to maintain the eligibility rules that were in place when the law was enacted--until 2014 for adults and 2019 for children.

The MOE requirement has caused concern among both Democratic and Republican governors who are searching for ways to bring down Medicaid costs and balance their budgets. GOP governors have been particularly outspoken about the MOE requirements, asking that the administration and lawmakers remove them. However, consumer and provider groups are urging lawmakers not to lift the requirements.

Aside from the hot-button issues of block grants and the MOE requirement, Barbour and Herbert stressed the importance of quick approval from the Centers for Medicare & Medicaid Services when the states do apply to make changes to their programs.

States know what will work best for them and CMS often takes too long to respond to requests for waivers or state plan amendments, they said. Barbour said those difficulties point to the need for block grants and the additional flexibility they would provide.

“We shouldn't have to come up here and kowtow and kiss the ring to get the permission from Washington to do that and try to help our people,” he said.

Massachusetts Gov. Deval Patrick (D), who also testified before the committee, offered a far milder assessment of how difficult it is for states to request changes from CMS but said the process can be “tedious.”

Patrick said that issue is a perennial one: the states seek more flexibility while CMS wants to ensure states remain accountable. He said that any efforts to ease that tension would be helpful.

Patrick also said he expects the health reform law to give states some of the tools they need to help control health care costs.

Expansion Costs.

The Republican governors criticized the costs of the Medicaid expansion included in the health reform law, as well as its overall approach, saying that it imposes too many mandates on the states.

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Senate Finance Committee ranking member Orrin G. Hatch (R-Utah) March 1 released a report that said the Medicaid expansion would cost states $118 billion through 2023, based primarily on states' own estimates of the costs.

However, House Energy and Commerce Democrats said the report is flawed because it does not include savings from reductions in uncompensated care and that each state estimate is not built on common assumptions or uses unrealistic assumptions. Democrats also said the report is misleading because it looks at an extended time frame, compared with other estimates.

Past estimates of the expansion costs for states have varied widely, in part based on whether they included any savings states could expect to gain from changes in Medicaid policies or other areas of the law and on which years were included in the estimate.

The Congressional Budget Office and a report by researchers at the Urban Institute, which looked only at spending, have said the expansion would cost states $20 billion, while other studies have found net national savings of $33 billion to $107 billion, according to a report by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured.

The Kaiser report said states are using widely different methodologies to estimate their costs of implementing the Patient Protection and Affordable Care Act and frequently ignore potential savings they may gain under the new health care law.

By Sarah Barr