Federal Budget Agenda Could Pose Problem for Governor’s Health Plan

Gov. Arnold Schwarzenegger's (R) health care reform proposal is "putting him on a collision course with budget hawks in the nation's capital and leaders in other states seeking assistance," the Los Angeles Times reports. According to the Times, the "cost of helping states fund their health plans ... is complicating President Bush's stated goal of balancing the federal budget in five years."

California and at least four other states "are pursuing initiatives to provide health insurance for all their residents," and the trend "could set off a scramble for increasingly scarce federal dollars," the Times reports.

Schwarzenegger has said that he would seek $3.7 billion in additional federal funds to cover the estimated $12 billion cost of the California proposal in the first year. California officials maintain that the state should receive almost all of the additional federal funds under current Medicaid and SCHIP program rules.

However, "Congress can change the underlying Medicaid law to cut spending on the program -- and it might come under pressure to do so, given that demands from California and other states are likely to add to the federal deficit," according to the Times.

Bush on Monday plans to present to Congress his fiscal year 2008 budget, which likely will recommend spending reductions for Medicaid and other federal health care programs that "Schwarzenegger is counting on to pay for his plan," the Times reports.

Joe Munso, deputy director of the Health and Human Services Agency, said, "Given the fact that most of these things fall within the existing laws and rules, we hope that we'll ultimately be successful in securing the funding. The federal government is a key partner in any of these solutions. They are a key partner in our programs today."

However, Senate Budget Committee ranking member Judd Gregg (R-N.H.) said of the additional federal funds, "That's a big number on an annual basis. California hasn't yet passed a law (implementing the governor's plan), but when they do, I would think people are going to take a deep breath."

Len Nichols of the New America Foundation added, "When they do the math and figure out exactly how much federal money will be flowing to California ... some people will say, 'Why should California get it and other states get nothing?'"

Rep. Pete Stark (D-Calif.), said, "We're not going to get a national health plan until two or three big states get plans of their own. Then big companies are going to come to Congress and say, 'Look, let's start to standardize this'" (Alonso-Zaldivar, Los Angeles Times, 1/30).