Governors warn of "double-dip" recession without Medicaid help

A dozen governors on Wednesday pleaded with Congress to quickly pass legislation extending enhanced federal Medicaid funding for states or risk a double-dip recession. The state leaders also suggested they're open to phased-down funding if that's what it takes to avoid the drastic cuts to state services that are looming because of congressional inaction.

Forty-seven governors of states and territories signed a letter in February asking that Congress extend for six months the 6.2 percent enhanced federal matching rate when it expires at the end of the year. But the Senate this month considered two proposals with lower rates in an unsuccessful bid to get support for its tax extenders bill from centrist Republicans such as Sen. Susan Collins (Maine).

"Could we live with that? It would be hard, because every increment means pain, every increment means job losses [and] none of them make sense to us. But sure," Gov. Ed Rendell (D-Pa.) said at a press conference. "But I think the key is action, and I can't stress [enough] the point about action now."

Rendell was in Washington along with Govs. Jennifer Granholm (D-Mich.), Christine Gregoire (D-Wash.), Martin O'Malley (D-Md.), David Paterson (D-N.Y.) and Mark Parkinson (D-Kan.) to take their message straight to lawmakers. Four others — Bill Ritter (D-Col.), Jodi Rell (R-Conn.), Pat Quinn (D-Ill.) and Arnold Schwarzenegger (R-Calif.) — participated in the press conference by videoconference. Rendell said he was also authorized to speak on behalf of Republican governors Sonny Perdue (Ga.), Janice Brewer (Ariz.) and Chris Christie (N.J.).

Rendell said if lawmakers don't act within the next two weeks, states — most of whose budget years start July 1 — will have to start making more cuts to education, social services and other programs. Many states have already made the deepest cuts in their history since the recession began.

The pending round of cuts, amounting to about $1 billion for New York and $1.8 billion for California, would force states to lay off tens of thousands of employees — including as many as 300,000 teachers nationwide — just as job creation is starting to pick up.

"We are in a very fragile recovery right now," Gregoire said. States are in "desperate need of assistance," without which the nation could suffer a double-dip recession.

Rell added that many governors feel the federal government has made things worse by imposing maintenance of effort requirements on their Medicaid programs that prohibit cutbacks in Medicaid eligibility.

Granholm said one way that states could save money on Medicaid would be to cut reimbursement rates, but that steep cuts could cause providers to abandon the system, and Medicaid beneficiaries might lose access to care. 

"For all of us, provider rates are one of the solutions," she said. "I don't know how you get around that."