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Washington -- The reactions of governors and other Medicaid stakeholders to a Senate Finance Committee's Medicaid expansion proposal ranged from reserved praise to open hostility.

The proposed expansion is part of Senate Finance Committee Chair Max Baucus' (D, Mont.) long-awaited health system reform bill, the America's Healthy Future Act. The bill, starting in 2014, would increase Medicaid eligibility for those U.S. citizens earning up to 133% of the federal poverty level. Most states offer very limited, if any, Medicaid coverage to adults without children.

Baucus negotiated the bill with five other senators, including three Republicans, none of whom supported the legislation as introduced on Sept. 15. Baucus said he and other bill authors held a conference call that day with about a dozen governors and heard few complaints.

"I frankly think that [the Medicaid expansion] is pretty much resolved," Baucus said. His committee began marking up the legislation Sept. 22.

On average, the federal government would pay for about 90% of the expansion, which would cover 11 million of the country's 46 million uninsured. States would pay at least 5% and possibly up to 22.7% of the state-specific cost. A preliminary Congressional Budget Office estimate released Sept. 16 pegged the expansion at $287 billion over a decade. Additional spending would be partially offset by a mandatory increase in manufacturers' Medicaid drug rebates, Baucus said. (See correction)

The American Medical Association sent a Sept. 21 letter to Baucus that does not reference the Medicaid expansion. But it lodges serious concerns about the reform bill's lack of a permanent Medicare physician payment solution. It also calls for major changes to provisions that effectively would ban new physician-owned hospitals, require doctors to report quality information to Medicare, cut pay for some services to provide bonuses for others, and establish an independent Medicare commission to adjust payment rates for services, among other proposals.

Governors say no thanks

The chairs of the bipartisan National Governors Assn. and the Republican Governors Assn. panned Baucus' Medicaid expansion less than 24 hours after Baucus suggested it was a done deal.

"It is an unfunded mandate that will come to the American people as state tax increases," said Mississippi Gov. Haley Barbour, chair of the Republican Governors Assn. Barbour estimated that covering 5% of the cost would require $80 million in additional funding in Mississippi.

In contrast, the pending House health reform bill would cover the entire cost of increasing Medicaid eligibility to people earning 133% of poverty. It also eventually would raise physician Medicaid pay to equal Medicare rates. The Finance bill does not address doctors' Medicaid fees.

Vermont Gov. Jim Douglas, chair of the National Governors Assn., said many states have cut education, underfunded pension plans and laid off employees during the latest recession. State revenues are expected to be weak for years. "We can't expect states to put every new dollar into a health care system when all these other important and vital public services have been neglected or underfunded." Douglas said the federal government should cover the entire cost of the Medicaid expansion.

Even Senate Majority Leader Harry Reid (D, Nev.) had mixed opinions on the Baucus bill. Reid offered muted praise for the legislation in a news release aimed at a national constituency on the Senate Democrats' Web site. The proposal "is another important piece to the puzzle and brings us a step closer to having a comprehensive health insurance reform bill on the Senate floor."

But Reid was more critical in a news release targeting Nevadans and posted on his personal Senate Web site. "While this draft bill is a good starting point, it needs improvement before it will work for Nevada." Reid said the state would face the second-highest increase in Medicaid spending under the Finance Committee bill.

On Sept. 22, Baucus said he had amended the bill to provide full federal funding to states that experience a significant increase in Medicaid enrollment due to the size of their current programs and their unemployment rates. Other senators filed more than 550 amendments in advance of the markup.

Some qualified support

Although the American Academy of Family Physicians supports expanding Medicaid eligibility to cover the uninsured, the organization is concerned about the Finance Committee's bill, said AAFP President-elect Lori Heim, MD. For example, the Finance measure doesn't provide funding for the millions of people who are eligible for Medicaid now but are not enrolled.

Still, Dr. Heim said, Medicaid coverage would be a step up for many. "There are a lot of good things about being on Medicaid if you have no insurance coverage at all."

But Dennis Smith, who ran Medicaid during the Bush administration, said its eligibility should be narrowed to focus on people with disabilities and people needing long-term care, not expanded to cover more able-bodied people. The latter would be better off with vouchers for private insurance because many don't stay enrolled in Medicaid for more than a couple of years, said Smith, former director of the Centers for Medicare & Medicaid Services' Center for Medicaid and State Operations and now a senior fellow at the Heritage Foundation.

Smith said the Finance bill's authors want to use Medicaid to cover more people because it pays physicians less than Medicare or private insurance. "They're doing it for budget reasons, not policy reasons."

The National Assn. of Public Hospitals and Health Systems has consistently supported expanding Medicaid, said NAPH President Larry Gage. Expanding Medicaid probably would be cheaper than trying to provide private insurance to the Medicaid-eligible population. "Medicaid is a flawed program, but it already exists. You don't have to create it."

Both the Senate Finance and House bills would reduce by billions federal payments to hospitals that care for the uninsured, but the Finance measure would do so more quickly, Gage said.

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