UPDATE: Health Reform and the States

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As Karen noted earlier today, she and I have a story in this week’s magazine about how much states will be on the hook if and when federal health reform passes.

The impetus for the story was, in part, the growing number of governors across the country publicly slamming the idea of expanding insurance coverage to millions of Americans by expanding Medicaid. Medicaid is jointly funded by the states and federal government, so such an expansion would create a new burden for state budgets, which are already very strapped. Hence, the governors’ protests, which have been mounting since mid-2009.

California is in dire financial shape already and the Medicaid expansion called for under Democratic health care reform could burden the state to the tune of $3 to $4 billion annually. Gov. Arnold Schwarzenegger, who had been an important ally, lambasted the Democratic health reform plan in his state of the state address yesterday calling it “a trough of bribes, deals and loopholes.” Well, the White House has apparently decided they need to try and shore up support among Democratic governors before things get any uglier.

Ben Smith of Politico is reporting:

The White House, facing growing demands from states to pick up part of the tab of health care reform, has convened a conference call with Democratic governors this afternoon, one Democratic staffer confirmed.

The governors — most of whom are battling their own budget crises — have been a dissonant note in a fairly disciplined Democratic chorus in support of the legislation, and it’s unclear what concessions (if any) would be needed to produce the kind of statement 22 of them made in October in support of a more vaguely defined health care reform bill.

Meanwhile, Democratic Sen. Ben Nelson, who got a sweetheart Medicaid deal for Nebraska in exchange for voting in favor of Senate health care bill, tells Politico he’s trying to get the same deal for all states now. (Nelson faced a nasty backlash after the details of his special deal became public. In what’s become known as the Cornhusker Kickback, he secured 100% permanent federal funding for new Medicaid enrollees in his state.) It is, in theory, possible for the federal government to pick up the tab for any and all new Medicaid enrollees, but that would further nationalize the program – something those warning of a “government takeover of health care” might criticize. Expanded federal funding for Medicaid would also significantly raise the price tag for health reform. The current Medicaid expansion called for in the Senate bill – to cover all Americans earning up to 133% of the federal poverty level – is already expected to cost the federal government $395 billion between 2010 and 2019, according to the Congressional Budget Office, a figure also includes funding for the Children’s Health Insurance Program.

Nelson says he’s also talking to Senate Democratic leaders about giving states the choice to opt out of the Medicaid expansion in 2017. It’s not clear how this could work. As we say in our story this week, “Of the 31 million uninsured people who would gain coverage under a revamped health system, about half would do so through a vast expansion of Medicaid…” Allowing this expansion to fall by the wayside in 2017 would negate a good portion of the health reform.