President Barack Obama’s healthcare reform proposal released Monday eliminates controversial funds given to Nebraska as part of a deal to win the support of centrist Sen. Ben Nelson (D).

Senate Majority Leader Harry Reid (D-Nev.) offered the $100 million in Medicaid funding, also known as the “Cornhusker Kickback,” to Nelson to help win him over* as the 60th vote on the Senate’s healthcare reform bill last December.


But the deal eventually backfired. During merger negotiations with the Senate, House leaders said the “kickback” was an unfair deal struck for Nebraska that was not available to other states and was given only to attract Nelson’s support.

Republicans also slammed the Nebraska deal, saying it was an example of Reid’s secretive, backroom negotiation style that violated President Obama’s call for transparency during the healthcare debate.

But the removal of the funds (page 1) could help pave the way for wary House Democrats to get on board with the president’s proposal.

Talks between the House and Senate stalled partially as a result of the Nebraska deal. The surprising victory of Sen. Scott Brown (R) in the Massachusetts special election in the midst of merger talks in January derailed the healthcare negotiations.

The Nebraska funds would have helped subsidize the state’s cost burden under the Medicare expansion mandated in the Senate healthcare bill.
Nelson originally defended the Nebraska deal, saying the funds were available to all states. But eventually he called for the dollars for his state to be cut from the Senate bill amid sinking approval for both him and the deal.

Obama’s bill, however, does not specifically remove $300 million of Medicaid funds pegged for disaster relief for which Louisiana is the only state eligible.

Republicans dubbed it the ”Louisiana Purchase” and said it was a corrupt bargain to win the support of holdout Sen. Mary Landrieu (D). But Landrieu said that Louisiana Gov. Bobby Jindal (R) had asked her to obtain the funds for what they deemed a flawed calculation under the Federal Medical Assistance Percentage (FMAP) program.

Obama’s proposal seeks to do away with unbalanced Medicaid assistance for states by providing 100 percent federal support for newly eligible individuals between 2014 and 2017, 95 percent support from 2018 to 2019 and 90 percent support from 2020 onward.

The percentages are closer to those in the House bill than those in the Senate bill.

*UPDATE: Nelson claims he did not seek the deal in exchange for his vote. His office says the provision was used as a placeholder until negotiations, when the same funding would be applied to all states.