Fifteen states may sue over healthcare reform

WASHINGTON (Reuters) - More than a dozen U.S. state attorneys general visited Washington on Wednesday threatening to sue the U.S. government if the so-called "Cornhusker Kickback," a special subsidy offered to Nebraska, is included in pen1ding healthcare reform legislation.

The subsidy, which was included in the Senate version of the bill, is "capricious and arbitrary treatment of Nebraska," said South Carolina's Republican Attorney General Henry McMaster, who has organized a group of 15 attorneys to pursue a lawsuit.

The group includes two Democrats, one from Oklahoma and one from American Samoa.

Many states are outraged by the caveat, which would have the federal government cover increases in Nebraska's obligations for Medicaid, the healthcare program for the poor jointly funded by the 50 states and federal government.

Medicaid already consumes large parts of states' budgets and would require even more funding under the reform plan, which would allow greater numbers of people to enroll in the program.

If the provision is removed they will not sue, McMaster said, but the attorneys are discussing where to file a suit and if the Supreme Court would have to hear the case.

McMaster wrote to Senate Majority Leader Harry Reid and House of Representatives Speaker Nancy Pelosi in December urging them to remove the provision as they hammer the bills into a single piece of legislation for President Barack Obama to sign into law.

He has yet to hear back from them. He has spoken to Sen. Bill Nelson, who represents Nebraska and who inserted the provision. Nelson has said he is fighting to ensure all states receive equal treatment to the Cornhusker State in the final law.

Meanwhile, the White House has said Obama is discussing how to handle Medicaid and the states.

Removing that provision may not stop other lawsuits, McMaster warned. He has joined another group of attorneys general who are concerned that an "individual mandate," or requirement that citizens buy health insurance, violates a clause in the Constitution about regulating interstate commerce.

(Reporting by Lisa Lambert; Editing by Andrew Hay)