Pawlenty Tells Feds to Keep Their Medicaid Money

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Minnesota Gov. Tim Pawlenty is feeling pretty good today. After using his political power as the state’s Republican leader and his veto power as governor, Pawlenty has notched a massive state budget victory that Politico’s Ben Smith says lays the groundwork for the governor’s assumed 2012 presidential run.

Refusing to compromise with Democrats who control the state legislature, Pawlenty held Republicans together and essentially forced the passage of a budget making huge spending cuts roughly the same size as the ones the governor tried to do unilaterally before he was rebuffed by the state supreme court.

Says Smith:

He will complete his two-term tenure at the end of this year having fulfilled his pledge not to raise taxes, with his approval ratings in positive territory, and having largely avoided the pragmatic compromises that often bedevil governors in polarized party primaries. His success gives him the accomplishments to match his conservative rhetoric, and set a high bar for other ambitious governors facing budget crises of their own in this lean year.

One Democratic budget priority that fell under the bus would have expanded the state’s Medicaid eligibility rules. Medicaid is jointly funded by states and the federal government, so expanding eligibility would bring Minnesota lots more federal dollars, but only on the condition that the state spend more of its own money.

Under federal health reform, beginning in 2014, states will be eligible for federal matching funds of 90% or more of their total Medicaid costs for new enrollees – this is far better match than they currently get. Between now and then, states that choose to voluntarily expand their Medicaid programs, as Democrats wanted, will get their standard federal match – 65% of total costs, in Minnesota’s case.

But because Minnesota already pays for care for some poor residents who aren’t eligible for Medicaid, it would only have to spend – say Democrats – $188 million to be eligible for $1.4 billion in federal Medicaid funds. In other words, it would have been a good financial deal for the state.

But it would be an expansion of government, something Pawlenty abhors and which would not help his cause as a potential 2012 Republican presidential candidate. Of Democrats in the state legislature, the Star Tribune in Minnesota reported:

They see the Medicaid option as a chance to cover more people, ensure better compensation for doctors and leverage $7 in federal money for every $1 the state spends.

Republicans, many of whom supported a similar plan a year ago, stoked conservative ire about the national health care debate and called it a headlong rush into so-called Obamacare.

State Senator John Marty, a member of the Democratic-Farmer-Labor Party, told Smith:

“… [Pawlenty] learned that politically the more often he says no to us, the more his political standing rises.”

“We are helping him sacrifice Minnesota for his presidential ambition.”

Medicaid will be an interesting marker in the next several years. It’s a program that costs states a lot, but also brings them billions in federal dollars. It’s technically a voluntary program, meaning states could opt out of it completely or refuse to expand their programs as allowed under the new health reform law. The former is basically an impossibility, but the latter may be something we hear calls for in states where opposition to government programs and spending runs high.