Medicaid plan faces opposition

White House, governors are at odds over move to cut payments to hospitals, nursing homes


WASHINGTON -- The White House is clashing with governors of both parties over a plan to cut Medicaid payments to hospitals and nursing homes that care for millions of low-income people.

The White House says the changes are needed to ensure the "fiscal integrity" of Medicaid and to curb "excessive payments" to health care providers.

But the plan faces growing opposition. The National Governors Association said it "would impose a huge financial burden on states," already struggling with explosive growth in health costs.

More than 330 members of Congress, including 103 Republicans, have objected to the plan. A letter signed by 82 House Republicans says it "would seriously disrupt financing of Medicaid programs around the country." A bipartisan group of 50 senators recently urged President Bush to scrap the proposed rules, which were set forth in his 2007 budget and could be issued before the end of this year.

Under the Bush plan, the federal government would reduce Medicaid payments to many public hospitals and nursing homes by redefining allowable costs. It would also limit the states' ability to finance their share of Medicaid by imposing taxes on health care providers. About two-thirds of the states have such taxes.

The federal government pays at least 50 percent of Medicaid costs in each state and more than 70 percent in the poorest states. Bush administration officials say states have used creative bookkeeping and accounting gimmicks to obtain large amounts of federal Medicaid money without paying their share. Moreover, they contend, some states have improperly recycled federal money to claim additional federal Medicaid funds.

"States have managed to draw down more federal Medicaid dollars with fewer state dollars," said Dennis G. Smith, director of the federal Center for Medicaid and State Operations.

State officials said that the proposed changes would put pressure on the states to reduce Medicaid benefits, restrict eligibility or lower payments to health care providers.

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