Debt limit talks may target federal Medicaid payments to statesby Brett Neely, Minnesota Public Radio
St. Paul, Minn. — Negotiations between Democrats and Republicans on how to raise the nation's debt limit continue in Washington. Republicans are demanding steep spending cuts as a precondition for their support, while President Barack Obama says tax increases should also be part of the deal.
One program that's in negotiators' cross-hairs is Medicaid - the joint federal state health insurance program for the poor. The proposals could shift billions of dollars in costs to the states.
Last year, Minnesota's Medicaid program spent more than $7 billion to insure about 600,000 people. The federal government chipped in about 60 percent that spending.
The details are still fuzzy but congressional Democrats have confirmed that the deficit reduction talks include proposals to cut Medicaid payments to states by more than $100 billion over the next decade.
For defenders of social net programs, such as Sen. Al Franken, D-Minn., those cuts are unacceptable.
"Evidently, some of my friends on the other side of the aisle want to get just a little more from poor sick kids," Franken said at a union-sponsored event yesterday filled with Medicaid supporters. "I mean, you know, poor sick kids haven't been giving enough."
Franken may have been throwing barbs at Republicans, but some in his own party are also on board with the cuts. The Obama Administration has signaled interest in cutting Medicaid payments.
Right now, the federal government pays a fixed percentage - typically half - of the cost for regular Medicare enrollees. Children's health insurance and some special programs get a higher federal payment rate. And starting in 2014, Medicaid will expand for those without health insurance due to the new health care law. The government will pick up 100 percent of the tab to cover those new enrollees for the first few years and 90 percent after that.
Judith Solomon, the vice president of health policy at the Center on Budget and Policy Priorities, says the plan under consideration now would require states to pay a bigger share.
"You're basically taking federal dollars out and leaving it up to the state to figure out whether to replace those dollars, or make changes to the program to accommodate the lesser federal funding that they're getting," she said.
Details are still scarce on what the new rates would be or when they would start.
But Solomon and other analysts say that even small cuts by the feds would easily mean that a state like Minnesota would be on the hook to make up well over $100 million a year in lost federal funds.
So even while Minnesota's state government is currently shut down because of a budget dispute, future state budget negotiations may have to find even more money to fill gaps if the cuts to Medicaid take place.
Franken says the federal budget shouldn't be balanced by shifting costs onto the states.
"My fear is that it would cost Minnesota a lot of money, cost Minnesota a lot of jobs and cost poor people who are sick care," he said.
Some House Democrats, such as Minnesota Rep. Tim Walz, say they're happy to consider entitlement cuts as part of a deficit deal. But in an interview last week, Walz said he was also concerned about the Medicaid proposal.
"But at the end of the day, many of the things they're proposing like this issue, will end up costing more," he said.
If these Medicaid cuts happen, they could undermine what the Obama Administration hopes will be its most important legacy: Last year's health care law that's supposed to bring health insurance to tens of millions of uninsured Americans.
Analyst Solomon says states only agreed to expand Medicaid under the law because the feds promised to pay most of the new costs.
"It just really makes it harder to argue to the states that they really should go all out in enrolling large numbers of newly eligible people when they are going to get a much lower match than they expected to get to cover their health care needs," she said.
States are so worried about this Medicaid proposal that the National Governors Association has already sent letters to President Obama and the Congressional negotiators asking them to take the cuts off the table.
If the talks ever result in a deal, we'll find out whether Washington listened to the governors' concerns.
- All Things Considered, 07/13/2011, 5:15 p.m.