Tensions between states, U.S. government over Medicaid grow

WASHINGTON (Reuters) - Assurances from the U.S. Congress that states will not be saddled with extra costs from a nationwide healthcare reform plan have done little to relieve the nervousness rippling through state legislatures and governors' offices.

The National Conference of State Legislature wrote to the Senate Finance Committee on Wednesday about parts of the plan the committee is currently drafting that would let more people enroll in the Medicaid insurance program for the poor.

Medicaid is administered by the states and the federal government reimburses them for slightly more than half of the costs. The proposed legislation would raise the income level of those who qualify for coverage, which could then increase the number of people who enroll.

"Just when states need more money to meet the increased demand for Medicaid services, they have less, which is why any federal expansion of eligibility and provider reimbursements has to come with full funding," said Senator Don Balfour, a Georgia state senator and president of the group in a statement on Wednesday.

At the same time, some are worried that the plan will require all Americans to have insurance.

There are 6 million Americans who are currently eligible for Medicaid but are not enrolled, according to Vermont Governor Jim Douglas. They would likely sign up for Medicaid if that requirement becomes law, also stretching states' budgets.

The conference demanded that any type of expansion be reimbursed 100 percent by the U.S. government.

"A lesser commitment from the federal government would shift billions of dollars in costs to states," it added.

But the Finance Committee's chairman, Max Baucus contends his plan would already "provide significant support to states to help finance the cost of increasing eligibility for the Medicaid program," according to a committee statement.

States would see a net decrease of $2.6 billion in their Medicaid spending from 2010 to 2012, although over the period of time stretching from 2010 to 2019 total state spending would increase 1.3 percent, according to the committee.

In a preliminary analysis of the legislation, the Congressional Budget Office said that by 2019 the healthcare plan would add 11 million people to Medicaid enrollment.

The CBO also said states would not be able to lower their existing Medicaid eligibility income level until 2013, but that they would receive enhanced reimbursements for new enrollees.

"The resulting reimbursement rate could not exceed 95 percent and would average about 90 percent in 2019," the CBO wrote.

(Reporting by Lisa Lambert; Editing by Kenneth Barry)