Medicaid Costs For State Present A Snag For Overhaul Snag

NPR | By Christopher Weaver

Published January 15, 2010 at 2:25 PM EST

Now that labor groups and the White House have patched things up over the Cadillac tax, some folks are predicting smooth sailing for Democrats' health-overhaul legislation. But, a handful of thorny issues remain, including anxiety in cash-strapped states facing with the cost of a large Medicaid expansion proposed in the bill.

Nevada , a Republican, gave voice to those concerns recently, asking his top health official to consider dropping out of the Medicaid program -- a voluntary partnership between states and the federal government to care for the poor -- instead of ponying up. The Las Vegas Sunthat story.

The thinking, which Gibbons' office attributes to a study by the conservative Heritage Foundation, is that states could avoid the expansion and save money by shuttering Medicaid programs and shifting the poor into private insurance plans supported by new federal subsidies proposed in the health overhaul.

That would be a pretty extreme reaction to the legislation, but the threat highlights just how much steam is left in the unresolved issue of how the bill would affect states. (Gibbons is not alone in his concerns).

Both the House and the Senate have proposed significant Medicaid expansions. Gibbons' people estimate that the Senate's version would cost Nevada around $613 million before the end of the decade.

But, Gibbons' backup plan -- funneling would-be Medicaid patients into the new program of federal subsidies to buy insurance -- wouldn't really work because many low-income people wouldn't qualify for the subsidies. Experts also say its unlikely a state would drop Medicaid, which, despite its costs, is a considered a good deal for states: They get at least half the programs' funding from Washington.

Proponents argue expanding Medicaid is cheaper than giving out subsidies for private coverage. But, after 2017, when the federal government stops footing the entire bill, the program would become more expensive for the states. Todd Eberly, a professor at St. Mary's College in Maryland who has researched various state Medicaid programs, told us recently, lawmakers may be using Medicaid to expand coverage "because they can hide the costs in the out years because eventually more and more of the cost falls to the states," and because the state programs have more power to hold costs down.

The same fears were at the heart of a compromise -- widely derided as the "Cornhusker Kickback" -- won by Sen. Ben Nelson, D-Neb., before the Christmas Eve morning vote to pass the Senate's version of the bill. In that deal, Democrats agreed that the federal government would foot the full cost of expanding Medicaid in Nebraska forever.

Nelson has since said he wants the same bargain for every state, and reminded his colleagues that he's not 100-percent sure he'll vote in favor of the final overhaul legislation.

Weaver is a reporter for , a nonprofit news service.