Why Medicaid Gums Up Machinery of Budget Deal

CALL it Medicaid madness. Washington politicians haggling over the federal budget have called the 30-year-old entitlement a "deal-breaker," and the biggest obstacle to reaching an agreement.

While President Clinton insists on preserving government guaranteed health care for the disabled, the elderly, and the poor, his Republican adversaries are adamant about curtailing spending and entrusting more power to state officials.

Even as the negotiations continue in fits and starts in the nation's capital, state leaders across the country are struggling to bridge their own differences over just how to grapple with the program's runaway costs. Their interest is understandable. Medicaid is by far the fastest growing portion of state spending - sometimes devouring a third of state budgets. Nationally, Medicaid spending eclipses the next biggest program under which federal funds are given to states - the highway program - by five times.

California's experience with rising costs typifies the challenges facing reformers at the state and federal level. With a burgeoning indigent and immigrant population, Gov. Pete Wilson (R) has persistently battled Washington for more Medicaid funds. When he is not warning about the economic consequences of rising costs, the governor is pointing to the federal program's inequities.

"In California, we have more than 14 percent of the nation's poor patients, yet New York, with only 9 percent, is the single largest recipient of federal [Medicaid] money," says Tim Ransdell, head of the California Institute for Federal Policy Research.

Indeed, government statistics show that New York absorbs 13 percent of federal Medicaid dollars, while California gets just 9 percent. That's because New York spends three times as much to care for each patient as does California, Mr. Ransdell says. The message, he claims, is that Washington rewards inefficiency.

How much money should be doled out, and for what reasons, underlies the negotiating going on in Washington. The GOP is calling for a lump-sum federal Medicaid payment to states, which would direct the funds as they see fit. Washington would be out of the Medicaid business altogether. The GOP would reduce costs by forcing states to deal with a finite sum of money.

The White House, by contrast, wants to limit Medicaid spending by putting a cap on the dollars each individual can receive. It would, however, allow new people to be added to Medicaid rolls - something the GOP plan wouldn't - thus continuing health care as a federal protection.

IT is this entitlement guarantee, even at a limited amount of coverage, that many GOP critics object to. They argue it dooms the program to its already perilous course of rewarding states that spend more with bigger supplements from Uncle Sam.

Still, many Democratic governors are equally adamant that the country must have a safety net for the poor. "We believe everybody who cannot afford health insurance ought to receive care," says Vermont Gov. Howard Dean, who notes that 80,000 of his state's 570,000 residents are Medicaid recipients.

GOP plans purport to remove Washington from state affairs and allow local management, but Republicans actually want to impose their own version of federal mandates, Mr. Dean says. He points to two provisions in the GOP Medicaid plan: one that would cut the link between welfare and Medicaid - welfare recipients have been automatically eligible for the health-care coverage since 1965 - and the other that prohibits states from enlarging the pool of people eligible for Medicaid.

Such moves are simply substituting "conservative micro-management for liberal micro-management," he says.

A bipartisan accord on Medicaid, with gubernatorial blessing, is seen as the linchpin in the budget talks. State leaders descended on Washington last week to meet with GOP budgeteers and urge Clinton to support the GOP's approach. In turn, the president urged GOP Govs. John Engler of Michigan and Michael Leavitt of Utah to meet with Democratic Govs. Roy Romer of Colorado and Lawton Chiles of Florida by themselves.

They did. But after protracted discussions, the group disbanded over the entitlement issue. In a conciliatory statement, Mr. Romer has suggested that the nation's governors may find common ground by agreeing to establish a neutral entity to handle Medicaid complaints.

In the interim, a host of lawmakers are working on their own interpretations of Medicaid's future - with help from governors. "When it comes down to it," says the GOP congressional staffer, "the governors do not want to be responsible for holding up the budget agreement."