Bloomberg News

Republican Governors Urge Medicaid Overhaul to Cut Spending

August 30, 2011

(Updates with administration response in 13th paragraph.)

Aug. 30 (Bloomberg) -- Medicaid, the U.S. health program for the poor, should be overhauled to limit spending and let states design programs without federal interference, Republican governors said.

In a report the Republican Governor’s Association issued today, 31 state and territorial leaders made their most detailed group effort to argue for an overhaul of the federal-state health program that the Congressional Budget Office said will insure 56 million people and cost the federal government $275 billion in 2011. Medicaid is among the biggest expenses for many states struggling with lower tax revenue.

“The United States literally cannot afford to have the status quo on Medicaid,” said Mississippi Governor Haley Barbour, a Republican who has called for overhauling the program by ending federal oversight. “We should not have to come to Washington on bended knee and kowtow for waivers to do these kinds of things.”

A congressional supercommittee is debating the fate of federal entitlement programs, including Medicare, Medicaid and Social Security, in an effort to reduce spending and the U.S. budget deficit. Representative Fred Upton, a member of the panel and the Republican chairman of the House Energy and Commerce Committee, asked governors in May to propose program changes.

The report focuses on the cost of the program to states and argues that managed-care plans will improve patients’ access to providers and coordinate services. It calls for a full overhaul of the program. “The Medicaid program must be truly transformed, not just reformed around the edges,” said the report.

Proposals Vary

“Each state Medicaid program should be accountable for measured improvement in the health status of their Medicaid populations based on quality and outcome metrics, rather than compliance with bureaucratic processes that, in too many cases, have no impact on improving the lives of the most vulnerable Americans,” according to the report.

The report outlines 31 proposals, including letting states do away with federal benefit and eligibility requirements in favor of setting goals for health outcomes and spending. Under the outcomes-based system, the federal government would only step in when states deviated from the program goals they decided jointly with the federal government.

Barbour rejected the idea that strong federal oversight of Medicaid was necessary. “The idea that Washington loves our constituents more than we do is offensive and false,” he said.

Supercommittee Setup

Another proposal would simplify the current system under which the federal government pays for a share of the program, currently 50 percent to 82 percent of total costs, according to the U.S. Department of Health and Human Services. The Republican governors recommend the U.S. give states a lump sum payment yearly and leave them accountable for how it is used.

Barbour said his staff has already spoken with Upton about the recommendations. “I think they will find it helpful,” Barbour said.

The 12-lawmaker committee, which has until Nov. 23 to come produce its plan, may be the best chance the Republican governors have of seeing the program overhauled. Medicaid is protected from cuts and changes if the supercommittee fails to find the $1.2 trillion in savings it has as its goal.

Upton said the recommendations “add to the growing collection of views from governors of both parties, which will help inform our efforts to reform Medicaid for the future,” he said in a statement.

Administration’s Arguments

As Republican lawmakers have asked for changes this year, the administration has repeatedly said it is doing all it can to give states flexibility to get costs down. “We remain committed to working with governors of both parties to provide as much flexibility in Medicaid as possible while protecting the people it serves,” Richard Sorian, a spokesman for the Health and Human Services Department, said in an e-mail. He rejected the report’s suggestion that the 2010 health-care law be repealed.

Republicans who helped produce the report denied that HHS had been flexible. “From my perspective, I think it’s gotten worse,” said Dennis Smith, secretary of the Wisconsin Department of Health Services. Smith’s office oversees the state’s Medicaid program, and he spoke by phone during the press briefing. “Although we get good sound bites from the top leadership, when we get to the regulations it’s quite a different story,” he said.

Fighting Fraud

The spending includes fighting fraud and abuse in the program, which the report says is now handled ineptly by the U.S. under a system where fraud is looked for after it occurs and money is paid out.

Whether the 2010 health-care law is “repealed or struck down, Medicaid is in dire need of reform,” said Bob McDonnell, chairman of the association and governor of Virginia. The overhaul is facing challenges in federal courts from Virginia and 26 other states seeking to overturn the legislation.

The governors would also turn Medicaid patients over to health management organizations, where insurers are given a lump sum for each patient and then charged with keeping costs down by managing their care. The Republican governors, in the report, say they shouldn’t have to get approval from the U.S. before pursuing such a program. Molina Healthcare Inc, based in Long Beach, California, Virginia Beach, Virginia-based Amerigroup Corp. and UnitedHealth Group Inc. provide the managed-care services to states.

Other proposals include raising co-payments for people who earn more than the federal poverty level, letting Medicaid patients use health savings accounts combined with high- deductible health plans and enrolling people in private coverage instead of Medicaid. They would also reduce the financial burden on Medicaid by having Medicare cover nursing home stays for 30 days more than it does now.

--Editors: Steve Walsh, Adriel Bettelheim

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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