Governors say cost shifting isn't true Medicaid reform

Nursing Homes, Feb, 2005 by Douglas J. Edwards

The nation's governors are warning the federal government not to simply shift Medicaid costs to states to cut ballooning federal deficits and finance priorities of President Bush's second term, such as Social Security reform. In a letter to House and Senate leaders, Virginia Gov. Mark R. Warner and Arkansas Gov. Mike Huckabee, chairman and vice-chairman, respectively, of the National Governors Association (NGA), wrote that Medicaid reform is governors' highest priority but that it "should not be part of a 2006 fiscal year budget reduction and reconciliation process, especially if it does nothing more than shift additional costs to states."

The governors said their commitment to Medicaid cost-effectiveness is reflected in the fact that the annual growth in Medicaid per capita spending has not exceeded approximately 4.5% per year, substantially less than the growth rate of private health insurance premiums (averaging 12.5% per year for the past three years). Although they recognized that total Medicaid costs are growing at 12% per year and that Medicaid expenditures now exceed those of Medicare, they cited two reasons for this growth, which they said are largely beyond states' control. First, states have experienced caseload increases of approximately 33% during the past four years. Second, and more costly to states, they said, has been the impact of long-term care and the dual eligible population. Regarding the latter, they said the dual eligible population's benefits should be 100% financed by Medicare.

"We agree that maintaining the status quo in Medicaid is not acceptable," wrote Warner and Huckabee. "However, it is equally unacceptable in any deficit reduction strategy to simply shift federal costs to states, as Medicaid continues to impose severe strains on state budgets."

This month President Bush will reveal his FY 2006 budget, and the NGA will hold a major working session on Medicaid reform at its winter meeting.

BY DOUGLAS J. EDWARDS, ASSISTANT EDITOR