Medicaid advocates breathe easy on Ryan's entitlement reform proposal

Medicaid advocates are increasingly confident that a GOP proposal to overhaul the low-income health program is off the table in Congress.

Replacing Medicaid's federal share with block grants for states was one of the central health entitlement reforms in the budget from Rep. Paul Ryan (R-Wis.) that passed the House, along with a proposal to replace Medicare with private insurance subsidies.

Ryan’s proposal would halve federal spending on Medicaid, saving the government $771 billion over a decade, but critics say it would force states to make devastating coverage cuts.

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The proposal has run into a firestorm of opposition from powerful industries, including hospitals and nursing homes, which employ tens of thousands of people across the country. Add a Democratic-controlled Senate and bipartisan warning cries from state officials, and House leaders are understandably weary of taking on the fight.

"It's not scheduled at this point," acknowledged Energy and Commerce Chairman Fred Upton (R-Mich.), whose panel has jurisdiction over Medicaid. Instead, Upton said, the panel is focusing on its continued grilling of Democrats' healthcare reform law — especially Wednesday's hearing on the law's Independent Payment Advisory Board, which Republicans argue is a Medicare rationing tool.

"Frankly, that issue. … No, that's all I'm going to say," Upton recently told The Hill. "We're just going to wait and see for now."

Upton's acknowledgment comes several months after Ways and Means Chairman Dave Camp (R-Mich.) announced that he had no intention of taking up Medicare reform legislation if it's going nowhere in the Senate.

"I'm not really interested in laying down more markers," Camp told reporters on May 5. "I'd rather have the committee working with the Senate and with the president to focus on savings and reforms that can be signed into law."

The Republican Governors Association, which has publicly praised the block-grant proposal, said it remained hopeful that Congress would pass legislation to give states more Medicaid flexibility.

"Republican governors have always understood that Medicaid reform is a long-term process and remain committed to it," spokesman Mike Schrimpf said in an e-mail. "The governors know that Medicaid spending is on an unsustainable trajectory and support plans that will give them greater flexibility to manage their state Medicaid programs."

A handful of Republican governors wrote to Ryan as early as April pledging the support of the Republican Governors Association. The letter was signed by RGA Chairman Rick Perry (Texas), Vice Chairman Bob McDonnell (Va.), Policy Chairman Haley Barbour (Miss.) and Policy Vice Chairman Chris Christie (N.J.).

"Medicaid reform is welcome and the Republican Governors overwhelmingly support the creation of a Medicaid block grant program," the letter read. "This well established approach will give states the freedom to innovate, share best practices, and create cost-effective ways to deliver quality health care to our most vulnerable populations."

Twenty-nine Republican governors signed onto a more recent letter to Upton and Senate Finance ranking member Orrin Hatch (R-Utah) that lays out seven principles that should guide Medicaid reform. Block granting the program is mentioned, but only as one example of "flexible, accountable financing mechanisms that are transparent and that hold states accountable for efficiency and quality healthcare."

"In the weeks and months ahead," Schrimpf said, "Republican governors will be issuing more specific recommendations that fall within the principles laid out in the letter."

The letter included Puerto Rico Gov. Luis Porteno, but not Gov. Rick Snyder of Michigan. In a separate letter to Upton, Snyder praised federal grants for allowing Michigan to cut general revenue spending on Medicaid even as the number of beneficiaries has doubled over the past decade.  

Sources in industry and health policy circles said other Republican governors are worried about losing federal funds and having to gut their Medicaid programs if the program became a block grant, despite their public show of support for the proposal. Those state fiscal concerns are one of the key reasons the block-grant proposal has been shelved for now, the sources said.

"I do think it's fair to say that the idea of going forward on the block-grant proposal is, for the near future, probably not possible," said an industry lobbyist.

But despite the apparent freeze on the Medicaid overhaul, industry groups and advocates are still bracing for painful cuts in the deficit talks. Proposals include reducing payment rates by creating a single "blended rate" for Medicaid and the Children's Health Insurance Program.

"The cuts that have been floated in the press are really challenging," an industry lobbyist said. "We're very concerned about those cuts."


—Update: This post was updated at 11 a.m. to include Michigan Gov. Rick Snyder's position.