House sends $16B in emergency Medicaid funding to White House

House lawmakers had interrupted their summer vacation this week to return to Washington to vote on the aid package. Democratic leaders said the funding was needed quickly because of the imminent start of the school year.

Debate over the bill has highlighted the ideological divide between the parties, with Republicans calling the proposal another in a long list of federal bailouts the nation can't afford, and Democrats arguing lawmakers' responsibility to help states weather the downturn for the sake of preserving jobs.

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Rep. Joe Barton (Texas), senior Republican on the Energy and Commerce Committee, summed up the GOP sentiment prior to Tuesday's vote, saying the proposal is a politically motivated stunt designed to win the support of a key Democratic constituency: teachers' unions.

"It's not going to reduce the unemployment rate," Barton warned.

Democrats disagreed, arguing that local officials on both sides of the aisle have lobbied for the extra funds.

"Many Republican governors … have asked for this money," said Rep. Frank Pallone Jr. (D-N.J.), who heads the Energy and Commerce Health subcommittee. "I don't see this at all as a partisan issue."

The sides also jousted over the offsets for the $26.1 billion package. Those included closing a tax loophole for corporations operating overseas; cutting roughly $1.5 billion out of a loan program encouraging investment in renewable energy; and reducing nearly $12 billion for food stamps beginning in 2014.

"We do not add a nickel to the national debt," said House Majority Leader Steny Hoyer (D-Md.).

Republicans aren't so convinced. They worry that Democrats have offered offsets using funds they'll simply replenish somewhere down the line. Rep. Ginny Brown-Waite (R-Fla.), for instance, warned that the food-stamp cuts "will never actually really take place."

Indeed, Democratic leaders are already vowing to replace some of the offsets later. Speaker Nancy Pelosi (D-Calif.), for example, said she's "not happy" with either the food stamp or the renewable energy cuts. "I hope," Pelosi added, "that we can make that up in another way."

As part of last year's economic stimulus package, Democrats hiked the federal share of Medicaid payments by 6.2 percent nationwide — an $87 billion provision that expires at the end of 2010, just halfway through most state budget years. In response, Democrats tried to extend that increase through the first six months of next year.

But that $24 billion proposal alienated Senate budget hawks, particularly Maine GOP Sen. Susan Collins, who wanted the federal increase phased out. The resulting compromise will provide states with a 3.2 percent federal hike in the first quarter of 2011, and a 1.2 percent bump in the second quarter.

The emergency funding is designed to address a fundamental flaw in the way Medicaid is funded: During recessions, when state revenues drop, enrollment in Medicaid often leaps, creating enormous new costs at a time when states can least afford them.