The Republican Conference has compiled a list of provisions in the Pelosi health care bill that would harm State governments' fiscal priorities and their sovereign authority:
Would Make States' Tough Fiscal Situations Worse. Section 1701(a) requires States to pay nearly 10 percent of the proposed Medicaid expansion, beginning in 2015. According to the preliminary Congressional Budget Office (CBO) score of the bill, this provision alone would require States to pay an additional $34 billion in matching funds over the next decade. However, States cannot afford their current Medicaid programs, which is why Congress included a $90 billion Medicaid bailout in the "stimulus" package-as well as an additional $23.5 billion bailout in H.R. 3962. Moreover, the cost of the Medicaid expansion borne by States would also rise appreciably in future years.
Forces Higher State Medicaid Spending. Provisions in H.R. 3962 as introduced would provide a higher federal match to expand the Medicaid program to all individuals earning up to 150 percent of the federal poverty level ($33,075 for a family of four). However, such an expansion-particularly when coupled with an individual mandate to purchase insurance-is likely to increase Medicaid enrollment among individuals who are already eligible for the program-and for whom a full federal match will not be available.
Encourages States to Drop Medicaid Entirely. Section 1703 of H.R. 3962 prohibits States from reducing their Medicaid eligibility standards or procedures at any point in the future. Governors in both parties have already voiced significant concerns about what Tennessee Democrat Gov. Phil Bredesen termed "the mother of all unfunded mandates" being imposed upon States. As a result of the added restrictions in Democrats' proposals, the head of Washington State's Medicaid program believes that States facing severe financial distress may say, "‘I have to get out of the Medicaid program altogether.'"
The Commissioner Giveth, The Commissioner Taketh Away. Section 308 of H.R. 3962 gives States the option to create State-based Exchanges as an alternative to the national Exchange created in the bill. However, the same section gives the Health Choices Commissioner-the new insurance "czar"-the authority to terminate the State Exchanges-at the Commissioner's sole discretion.
Undermines State Flexibility. Several other provisions in the bill would significantly undermine States' independence in managing their Medicaid programs. Section 1714(c) requires States to include family planning services for individuals with incomes up to the highest Medicaid income threshold in each State-undermining flexibility established by Republicans in the Deficit Reduction Act of 2005. And Section 1781(f) expands the federal Medicaid entitlement to all populations covered by a State's Medicaid waiver-which could discourage States from using innovative waiver methods to expand coverage options, as such actions would increase their fiscal obligations permanently by the statutory entitlement expansion.
Supersedes State Authority. Section 1702 of H.R. 3962 requires States to enter into a memorandum of understanding with the Commissioner that requires States to accept into their Medicaid programs anyone deemed eligible by the Commissioner. The bill pre-empts States' authority to manage their own Medicaid programs by requiring States to receive federal approval of their Medicaid managed care organizations' provider networks (no such requirement is imposed on government-run Medicaid plans). Moreover, Section 1755 imposes price controls on States' Medicaid managed care organizations-a further instance of the federal government overriding State flexibility and authority.