Governors fear budget would endanger states

Governors gathered in Washington to discuss funding and issues with the president.
WASHINGTON (AP) -- After meeting with President Bush, governors expressed concern Monday that the administration's proposal to cut some $40 billion from the Medicaid health insurance program for the poor would further strain already tight state budgets.
"All governors are very, very reluctant to see any kind of major reduction to the system," Republican Bob Riley of Alabama said.
Democrat Janet Napolitano of Arizona said the president was too focused on a specific figure that would help reduce the federal deficit. "If the president wants Medicaid reform, then he needs to have a reform discussion that's not driven by an arbitrary budget number," she said.
Some governors, however, said they realized they eventually must compromise. They also wanted the ability to experiment in order to lower costs. Many were encouraged by parts of the administration's budget proposal that would give states more flexibility.
Revamping Medicaid
At the meeting, Bush promised to work with governors to restrain soaring Medicaid costs and revamp the program. But he also indicated he would keep trying to eliminate some federal aid.
"We want Medicaid to work," Bush told the governors before an hourlong, private question-and-answer session. "The system needs to be reformed and we want to work with governors."
But the one detail Bush emphasized was his plan to cut federal dollars in an effort to stop state Medicaid accounting practices that the administration contends cheat taxpayers.
Many state leaders say the money derived this way is essential. Federal officials say the practice artificially inflates health care prices to bring in more federal cash, which states sometimes use for other purposes.
"We're worried" about the transfers, Bush said. "We put that on the table for discussion, so that the system works the way it's supposed to work."
Riley said Bush's proposed cuts would cost Alabama $600 million over the next four or five years. Meanwhile, the number of Alabama residents on Medicaid has climbed from one in 10 to nearly one in five. Cuts will mean fewer services and probably force people off the rolls, Riley said.
Medicaid costs have soared in recent years, driven by rising health care costs, an aging population that relies largely on Medicaid to pay for nursing homes, and a recession that sent more people to state-supported health care.
This year, Medicaid will pay for care for 53 million people -- women and children, poor, elderly, disabled. It will cost an estimated $329 billion. Enrollment has increased by 40 percent over the past five years.
A group of governors has spent the past month hoping to develop a plan to present to the administration and Congress that would counter Bush's cuts with changes that would save money without hurting state budgets.
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