Obama plan kills "Cornhusker Kickback," boosts Medicaid

WASHINGTON (Reuters) - The so-called “Cornhusker Kickback” that gave Nebraska a special deal in the Senate’s healthcare legislation, and which 15 states had threatened to sue over, has been dropped from a fresh reform proposal President Barack Obama released on Monday.

The caveat in the stalled Senate bill would have had the government pick up a greater share of Nebraska’s obligations for Medicaid, the healthcare program for the poor jointly funded by the 50 states and the federal government. It was added when a Nebraska senator objected to the legislation over concerns that it covered some abortion procedures.

On Monday, Obama released a new plan to reform healthcare after the legislation stalled in Congress in January. He said the revised plan would provide coverage for 31 million uninsured Americans.

According to White House documents, a “key improvement” in the new plan would be eliminating the special Medicaid treatment for the Cornhusker state and “providing significant additional federal financing to all states for the expansion of Medicaid.”

Governors meeting this past weekend in the nation’s capital had voiced concern that any federal healthcare reform would increase enrollment for Medicaid, which is typically their largest budget burden.

Stress on the Medicaid system has spiked recently as thousands of Americans have lost their jobs and work-provided health insurance in the recession that began in 2007. At the same time, states’ tax revenue and their ability to pay for the program have plummeted. Many states are already considering cutting Medicaid offerings, while asking for some of the Medicaid help included in the economic stimulus plan passed last year be extended for another six months.

In Obama’s proposal, states would begin expanding Medicaid eligibility in April. Then, on January 1, 2014, “all low-income, non-elderly and non-disabled individuals will be eligible for Medicaid,” including unemployed adults and those living in poverty, which is defined as a family of four with an income below $29,000 per year.

The U.S. government would provide to states 100 percent of the cost of these newly eligible people between 2014 and 2017, 95 percent of the costs between 2018 and 2019, and 90 percent matching for subsequent years.

Starting in fiscal year 2016, states would also receive a 23 percentage point increase in money for the Children’s Health Insurance Program that provides healthcare to kids and was nearly wiped out under former President George W. Bush.

On Sunday, members of the National Governors Association said they had ideas to share on healthcare reform with the federal government from experiences in their states. Obama’s plan would encourage states to create demonstration projects that would “identify the most innovative care models that can be replicated throughout the country,” according to the documents.

Reporting by Lisa Lambert; Editing by Dan Grebler