Governors: Medicaid More A Budget Buster Than Ever What makes this Medicaid fight different from those of the past is the impact of the new health law, which calls for a huge expansion of Medicaid in 2014 to low-income childless adults. Many governors are upset because they are not allowed to cut back on most Medicaid eligibility if they want federal money.

Governors: Medicaid More A Budget Buster Than Ever

Governors: Medicaid More A Budget Buster Than Ever

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The federal government and the states have shared the cost of Medicaid, the health insurance program for some 60 million low-income Americans, since it was created in 1965.

They've shared something else almost that long — arguments about who should foot how much of the ever-escalating bill.

"Medicaid cost growth has been a problem for time immemorial," says Alan Weil, executive director of the National Academy for State Health Policy.

But this time, he says, things are different.

For one thing, "the program is bigger, so growth on a larger base is more real dollars that's harder to find."

Ending Support Early?

Indeed, at this weekend's meeting of the National Governors Association in Washington, Wisconsin GOP Gov. Scott Walker [attending via teleconference due to his own state's budget crisis] pointed out that of his state's projected $3.6 billion budget deficit over the next two years, fully half "is attributable to Medicaid."

In fact, enrollment in Medicaid in recent years has outstripped its better-known sibling, Medicare. Medicaid's low-income beneficiaries are mostly pregnant women, children, seniors, and those with disabilities.

A second problem, says Weil, is that this particular economic downturn is lasting much longer than many economists predicted. That means not only less revenue coming in for states, but more people qualifying for Medicaid, because they have lost their jobs and their health insurance.

Congress had been giving the states extra money for Medicaid. But it's about to end — as of July 1. Weil says if the federal government had continued that financial aid to the states, "we probably wouldn't be hearing what we're hearing now. But basically the federal support is ending a little bit too early relative to when state revenues are picking up."

'Tied Our Hands'

That was a common theme sounded by governors at a meeting of their Health and Human Services Committee Sunday.

"I had to come up with $540 million to plug the Medicaid hole," said Iowa Gov. Terry Branstad, a Republican, "because of the onetime stimulus money and other onetime state money that was used."

Dennis Smith, former federal Medicaid chief who is now Wisconsin's secretary of health services said: "It's going to be about $600 million over a two-year period of time. So we have to make up that money for ourselves, without really helping anyone or making any changes."

But what really makes this Medicaid fight different from ones that have come before is the impact of the health overhaul passed last year, which calls for a huge expansion of Medicaid in 2014 to low-income childless adults.

States won't actually be on the hook for most of those costs; all but 10 percent will be paid by the federal government.

But between now and 2014, in order to get that federal money, governors basically can't cut back on most Medicaid eligibility. That makes a lot of them, well, not very happy.

"I really believe that the federal government, with their maintenance of effort, have really tied our hands and not given us the flexibility to do what we do," said Iowa's Branstad. "I don't mind being held accountable [but] I'd like to be able to set our own eligibility requirements."

Utah's GOP Gov. Gary Herbert expressed the same sort of frustration in a speech to the conservative Heritage Foundation earlier this month.

"They are taking away the ability to manage the budget," he said.

With the requirement to maintain eligibility "the government is saying, 'Whatever you had in 2010, you've got to maintain that or accelerate it.'"

Some Democrats Supportive

But not every governor is finding the new health law a negative for its Medicaid program.

Minnesota is actually adding low-income adults to Medicaid this year, three years early. New Democratic Gov. Mark Dayton says that's because the state was already providing insurance to those people, but using only state dollars, so it will actually save money by getting the federal government to kick in a share.

"Easiest decision I've had to make in my first two months in office," he said with a smile.

And while Republican governors continue to argue that the health law is hurting their budgets, Maryland Democratic Gov. Martin O'Malley argued just the opposite.

"I think governors have never had more tools to bring down the cost of health care than we do right now, because of technology and the flexibility of the Affordable Care Act," O'Malley said.

Late last week, federal officials signaled they would give the states some more flexibility to waive the requirements that they maintain Medicaid eligibility if they can show they would otherwise run a budget deficit. Many governors, however, say they still want more flexibility to decide who to keep on Medicaid — and who, or what, to cut.