Mass. governor warns debt negotiators of pending catastrophe for states

Gov. Deval Patrick (D-Mass.) warned congressional leaders Friday that failure to act in time on the debt ceiling would immediately cost states hundreds of millions of dollars in lost federal payments.

"Massachusetts draws down over $200 million in federal reimbursements weekly for programs ranging from Medicaid to food assistance," Patrick wrote to leaders of both parties. "Failure by the U.S. government to meet its obligations to the Commonwealth for even a short period of time could create a serious state cash-flow issue. As demonstrated in the latest jobs report, state governments are still reeling from the recession and can ill afford to bear the brunt of such a preventable crisis."

The letter goes on to warn about the negative consequences of some of the proposals reportedly under discussion as part of debt ceiling talks.

In particular, he warns that eliminating states' ability to raise taxes on Medicaid providers would cost the state $400 million a year and "seriously threaten the ability of Massachusetts (and the 45 other states that rely on similar assessment) to finance our Medicaid program." Most states tax hospitals and other providers with the implicit understanding that the providers will be able to recoup those taxes through higher federal Medicaid payments, which shifts federal revenues to the states.

Patrick also urges Congress to reject cuts to Medicare payments for Graduate Medical Education. He proposes several ways to save money, including improving coordination of care for people who are simultaneously on Medicare and Medicaid and cutting down on preventable hospital readmissions.

Patrick has considerable clout as one of President Obama's closest allies in the states. He has called the president's deficit stance "a very balanced approach" and urged Congress to increase tax revenues along with spending cuts in a June 30 Washington Post op-ed.