Perdue rejects Medicaid changes in proposed federal budget

N.C. Gov. Beverly Perdue says the federal budget proposal unveiled by the GOP in Congress this week could decimate the way states pay for health care for their poorest residents.

The 2012 budget proposal from U.S. House Budget Committee Chairman Paul Ryan would undo the current funding formula for Medicaid. Instead, he would shift it into state-based block grants.

The Ryan budget says the current cost-sharing system between the federal and state governments “gives states a perverse incentive to grow the program and little incentive to save.”

But Perdue disagrees.

She was one of 17 Democratic governors who signed a letter Monday urging congressional leaders to oppose the Medicaid change.

Calling the proposal “simply unacceptable,” the letter said that block grants with an annual spending cap would be quickly outpaced by the growth in states’ needs.

“The costs of population increases, aging populations, economic downturns, natural disasters, new diseases or epidemics would all be shouldered by states,” the letter said.

The House GOP budget proposal must still go through significant debate, and then it acts merely as a guideline to the congressional appropriations process. But states are paying attention because the result could impact their bottom line.

Under the current system, the state pays one-third of Medicaid costs and the federal government pays two-thirds. Money comes from Washington based on state needs.

In North Carolina, the state share of Medicaid funding makes up about 17 percent of the state’s annual budget, said Lanier Cansler, secretary of the N.C. Department of Health and Human Services. Some 1.5 million residents use the program to pay for their health care costs.

Ryan argued in his budget that the block grants would give the states more flexibility, and that it would be indexed to population growth and inflation.

Cansler said North Carolina welcomes flexibility, but that it needs the certainty of a funding formula.

“To go to a block grant could be a fiscal disaster for us,” Cansler said.
“We are a rapidly growing state, we are a rapidly aging state, and we have a rapid growth of lower income population, and that’s the ingredients to make the Medicaid program grow rapidly,” he said.

Citing the Congressional Budget Office, the Ryan budget proposal says federal spending on Medicaid will grow by 7 percent annually from nearly $260 billion in 2012 to nearly $560 billion within the next decade.

He says his budget would save $750 billion over a decade.

Ryan and others had warned that entitlement programs would have to be addressed in the budget, so governors weren’t unprepared.

The president’s national debt commission, co-chaired by former UNC system president Erskine Bowles and former U.S. Sen. Alan Simpson, had warned that Medicaid would need changes to stem federal spending.

Still, Bowles suggested in congressional testimony last month that Medicaid block grants would be one of the “more drastic measures” that Congress would have to consider if reforms to the program weren’t enacted.