Arizona governor seeks ban on new Medicaid rules

By Ayesha Rascoe

WASHINGTON (Reuters) - The U.S. Congress should place a moratorium on implementing proposed Medicaid regulations that will increase costs for states already grappling with rising health-care costs, Arizona Gov. Janet Napolitano said on Tuesday.

Napolitano, a Democrat, said the Bush administration's pending regulations would shift to states an estimated $13 billion in costs for Medicaid, the health program for the poor that is jointly administered by states and the federal government. She said the move is particularly difficult at a time when state revenues are declining from an economic downturn.

"The top priority as we manage our way through this would be on the health care, Medicaid side," Napolitano said. "That is where the states incur an immediate cost out of their budget, that is where the enrollment goes up as economic circumstances wane."

U.S. governors, who met with members of Congress and President George W. Bush this week as part of their winter conference in Washington, have said the moratorium is necessary because of Bush's proposal to cut federal Medicaid investment by $18.2 billion over the next five years.

The six new regulations, issued by the Centers for Medicare and Medicaid Services and scheduled to take effect over the next few months, would ban the use of federal Medicaid money to pay for doctor training, eliminate some funds for disability programs, and limit Medicaid payments to hospitals and nursing homes run by state governments.

Mississippi Gov. Haley Barbour, a Republican, told the House Energy and Commerce Committee his state would be short-changed.

"Given the strait-jacket of federal rules on how we can run our Medicaid program, these changes, if allowed to proceed, will likely result in reduced reimbursement rates for providers and reduced services for the beneficiaries," he said.

He said cutting funds for graduate medical education would likely cost the University of Mississippi Medical Center $15 million.

In a report issued Monday, the CMS said that Medicaid spending will grow by 6.8 percent and reach $361.2 billion in 2008, and for the next decade will likely grow an average of 7.9 percent each year.

Proponents of the new regulations have said they will make sure the altered programs fit Medicaid's role.

The governors, though, say their states are already financially stretched without the growing costs.

Eighteen states are facing budget deficits totaling $14 billion in 2008, while 21 states expect deficits totaling $32 billion in 2009, Napolitano said. Since 49 out of 50 states cannot use deficit spending, she said they will have to cut education and healthcare spending to compensate for declines in revenue.

(Additional reporting by Lisa Lambert; Editing by Leslie Adler)