Governors Propose ‘Radical’ Structural Changes for Medicaid

The Committee on Human Resources of the National Governors' Association yesterday recommended "radical changes" in the structure of Medicaid to allow states to cover more individuals while providing fewer benefits, the New York Times reports. The draft policy statement, expected to be endorsed tomorrow by the full association, was issued during the annual meeting of the NGA, and calls for states to be given greater flexibility in administering their Medicaid programs. Citing the rigidity of the "current all-or-nothing structure" of providing benefits to individuals enrolled in Medicaid, the statement says, "States should have more flexibility with optional benefits and optional populations." However, under the proposal a "comprehensive package of benefits" would be guaranteed to the poorest Medicaid beneficiaries, thereby "maintaining the health care safety net for the vulnerable populations." According to Tennessee Gov. Don Sundquist (R), the proposed policy would allow Medicaid to be combined with employer-sponsored insurance, permitt states to use Medicaid funds "to pay for part of the employer share of premiums."

Governors from both political parties, having experienced "years of frustration" with Medicaid, expressed support for the changes. Maryland Gov. Parris Glendening (D), the chair of the association, said the new policy was necessary because "health care costs are rising at the same time tax revenues are declining in many states," thus frustrating many states' efforts to expand coverage to the uninsured. Utah Gov. Michael Leavitt (R) added, "The goal is simple: to provide some access to basic health care for everyone, rather than a rich plan of health benefits for just a small group of people." Noting that Medicaid benefits are typically "more generous" than those offered by private employers, he said that Utah could "cover 40% more children if we could design a health insurance program that matched the state employees' program, as an alternative to Medicaid." Vermont Gov. Howard Dean (D), a co-author of the proposal, said that if the reforms were enacted, he would expand Medicaid to cover adults "with incomes exceeding" 150% of the federal poverty level. The Times reports that the governors intend for the proposal to serve as a "blueprint for Congressional action" similar to the support expressed by the NGA before the 1996 welfare reform act (Pear, New York Times, 2/26).

Also speaking at the meeting, HHS Secretary Tommy Thompson announced that two regulations issued by the Clinton administration affecting Medicaid and CHIP would be delayed for 60 days. The first rule is "designed to protect the rights of Medicaid [beneficiaries] in managed care plans," and was set to take effect on April 19. Thompson said that in the interim he would meet with advocacy groups and state officials "to determine whether the regulations should be overhauled." The rule has been criticized by states, who believe it will increase the administrative costs of Medicaid (McGinley, Wall Street Journal, 2/26). Thompson said it was "not realistic to expect the states to renegotiate their managed care contracts and come into compliance" by April. He also announced a "similar delay" for CHIP rules proposed by former President Clinton (New York Times, 2/26). In addition, he announced that every state could apply for a $50,000 federal "planning grant" -- with no matching requirement -- for "aiding elderly and disabled people in community settings" (Allen/Broder, Washington Post, 2/26). The Times reports that these decisions, as well as comments made to the governor's association, "suggest" that Thompson, the former governor of Wisconsin, will support the governors' call for greater freedom in administering Medicaid (New York Times, 2/26). "President Bush has brought the lessons we learned we learned as governors to Washington. We will consult with you and advocacy groups of health plans. And if changes need to be made, we will make them," Thompson said (Benedetto,
USA Today, 2/26).