Governors Urge “Flexibility” in Medicaid at Congressional Hearing

by Rebecca Farley on March 3, 2011

A group of governors this week testified before the House Committee on Energy and Commerce about the need for greater “flexibility” in their Medicaid programs. States are under pressure to drastically reduce spending, and some states want to find budget savings by cutting millions of individuals from Medicaid.

Governors Haley Barbour of Mississippi and Gary Herbert of Utah proposed using a block grant model to fund Medicaid so as to allow states the maximum amount of flexibility in designing and operating their own programs. Under a block grant model, the federal government would provide a fixed amount of funding to each state for its Medicaid program, and states would be responsible for all additional costs. Barbour and Herbert suggested that a block grant model would make states’ Medicaid costs more stable and predictable over time. However, a report from the Center on Budget and Policy Priorities indicates that moving to a block grant model would have the opposite effect. By making states responsible for all expenditures beyond the yearly fixed amount, it would ensure stable and predictable costs for the federal government but impose more financial risks and higher costs on the states.

The governors also objected to the maintenance of effort (MOE) requirement under health reform that prevents states from rolling back Medicaid eligibility. It is likely that legislation to allow maintenance of effort rollbacks will soon be introduced soon in the Energy and Commerce Committee. However, any legislation to eliminate the maintenance of effort requirement or otherwise significantly modify states’ responsibilities to provide Medicaid coverage would likely face an uphill battle in the Senate and the White House. The Center on Budget and Policy Priorities has published a report outlining the adverse effects on states of removing the MOE requirement.

Meanwhile, President Obama indicated this week that he would support allowing states to opt out of complying with the health law’s requirements – if they could guarantee an alternative method of providing universal coverage. Secretary of Health and Human Services Kathleen Sibelius issued a letter to states outlining the many ways they have flexibility under the law to make changes to the Medicaid program without drastically reducing coverage.

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