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

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Here at home, many of the nation's governors gathered in Washington over the weekend, most share a common problem - budget shortfalls. As they try to find a way to balance their budgets, many are looking at the Medicaid health program for the poor. NPR's Julie Rovner reports on the latest fight between the states and the federal government.

JULIE ROVNER: Since the feds and the states share the costs of Medicaid, arguments between the two about its rising costs aren't exactly new.

Mr. ALAN WEIL (Executive director, National Academy for State Health Policy): Medicaid cost growth has been a problem for time immemorial.

ROVNER: Alan Weil is executive director of the National Academy for State Health Policy. But he says, this time, things are different.

Mr. WEIL: One is the program is bigger, and so growth on a larger base is more real dollars that it's harder to find.

ROVNER: Indeed, enrollment in Medicaid in recent years has outstripped its better-known sibling, Medicare. Medicaid today covers some 60 million low-income Americans, mostly pregnant women, children, seniors, and those with disabilities.

A second problem, says Weil, is that this particular economic downturn is lasting a lot longer than many economists predicted. That means not only less revenue coming in for states, but more people qualifying for Medicaid. Congress had been giving the states extra money for Medicaid. But it's about to end, as of this July 1st.

Mr. WEIL: So if the fed government would continue its support for states for another year or two, 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.

ROVNER: That was a common theme sounded by governors gathered in Washington this weekend for the state executives' annual winter meeting. Here's Iowa Republican Governor, Terry Branstad.

Governor TERRY BRANSTAD (Republican, Iowa): I had to come up with $540 million to plug the Medicaid hole, because of the one-time stimulus money and other one-time state money that was used.

ROVNER: And here's Dennis Smith, the former head of the federal Medicaid program, who's now in charge of Medicaid and other health programs in Wisconsin.

Mr. DENNIS SMITH: It's going to be about 600 million over two years' period of time. So we have to make up that money for ourselves, without really helping anyone or making any changes.

ROVNER: But what really makes this Medicaid fight different from ones that have come before is the impact of the new health law. That law calls for a huge expansion of Medicaid in 2014 to low income childless adults. Actually the states won't be on the hook for most of those costs. All but 10 percent will be paid by the federal government.

So what's the problem then? Between now and 2014, the next two and a half years, 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. Again, Iowa's Terry Branstad.

Gov. BRANSTAD: I really believe that the federal government, with their maintenance of efforts, have really tied our hands and not given us the flexibility to do what we do. I don't mind being held accountable. I'd like to be able to set out own eligibility requirements.

ROVNER: But not every governor is finding the new health law a negative for its Medicaid program. Minnesota's actually adding low income adults to Medicaid this year, three years early. New Democratic Governor 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.

Governor MARK DAYTON (Democrat, Minnesota): Easiest decision I've had to make in my first two months in office.

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

Governor MARTIN O'MALLEY (Democrat, Maryland): 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.

ROVNER: 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 want still more flexibility to decide who to keep on Medicaid, and who or what to cut.

Julie Rovner, NPR News, Washington.

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