Medicaid (search) would undergo the most fundamental shift since its creation nearly 40 years ago, with states winning considerable power to remake their programs, under a plan drafted by a task force of governors.
The plan would endorse much of the proposal put forth by President Bush (search). That plan has attracted considerable opposition from Democrats and others who fear it would jeopardize basic benefits and protections for people in the health insurance program for the poor.
Such deep revisions in the program would require congressional approval.
Supporters say it would let states save money by creatively remaking their Medicaid programs. And they argue that giving them authority to trim services will prevent states from cutting them altogether.
Health and Human Services Secretary Tommy Thompson has said repeatedly the administration's plan is made to order for governors because it gives them enormous flexibility, and the task force of the National Governors Association (search) is set to agree.
"Medicaid reform must incorporate the philosophy of maximizing state choices," says the draft circulating among the 10-member NGA Medicaid task force.
The panel plans a vote on Tuesday and a vote of the full NGA executive committee is planned for later in the week.
The plan appears to have enough support for approval within the task force, but there is opposition. Already, some governors are saying it jeopardizes basic Medicaid principles, largely by eliminating the guarantee that federal government will match state spending on health care for the poor.
"I cannot in good conscience support a Medicaid reform proposal that does not include adequate protections for the population we serve," Missouri Gov. Bob Holden, a Democrat, said Friday.
Medicaid serves about 44 million people, including some who are automatically eligible for health care because they are very poor, and others whose states add to the program voluntarily. Some Medicaid benefits -- such as hospital care -- are mandatory, while others such as prescription drugs, dental care, vision care and preventive services are optional for the states.
Neither the NGA nor the Bush plans would affect the people or the benefits that states must include. But both would give states considerable power to remake the program for the optional populations and benefits.
Under current law, states are restricted in how they can shape their Medicaid programs. For instance, if they cover one prescription drug, they must cover all prescription drugs. If they offer dental care in one part of the state, they have to offer it throughout the state. They may only charge participants limited copayments for services.
Furthermore, under current law, the federal government matches what states spend on the program, no matter what the cost. Under the proposed changes, federal spending would be capped each year.
In one change, the NGA plan allows for extra money to the states in certain situations, such as natural disasters and very high unemployment.
But the NGA plan is just as worrisome as the Bush proposal, said Ron Pollack, president of Families USA, a liberal advocacy group that focuses on health care.
"If this proposal is enacted it would do more damage to the health care of low-income seniors, children and people with disabilities than any health policy change since Medicaid and Medicare were enacted in 1965," Pollack said.
Thompson has defended the administration plan by emphasizing it would be optional for states and that it would not affect the poorest Americans.
The NGA plan was defended by governors of both parties.
Iowa Gov. Tom Vilsack, a Democrat, said states struggling financially will cut services altogether if they don't have the power to trim them back.
"What's happening now is that states are opting to deal with these double-digit increases (in Medicaid costs) by denying access to health care, and the purpose of this program is to provide access to health care," Vilsack said in an interview. He crafted much of the NGA plan with Florida Gov. Jeb Bush, a Republican who also helped shape the administration's plan.
The NGA plan adds a few new ideas to the administration proposal. Most notably, it calls on the federal government to pay all costs for poor seniors who are now eligible for both Medicare and Medicaid.
Under current law, the states wind up paying for much of their long-term care expenses. One estimate puts the cost to the federal government of taking over those expenses at $100 billion over 10 years.
It would also give even states that do not participate in the block-grant funding new power to reshape their programs.