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Clinton Demands Changes in Welfare, Medicaid Proposals

Reform: Shalala tells Senate panel that bipartisan governors' plan for greater state control could hurt poor children. Republican leaders want to push ahead.


WASHINGTON — The Clinton administration said Wednesday that a bipartisan plan by the nation's governors to overhaul welfare and Medicaid is unacceptable to the White House, warning Congress that significant modifications are needed to avoid endangering poor children.

Delivering an unexpectedly harsh critique of the governors' proposed legislation, Health and Human Services Secretary Donna Shalala told a Senate panel that President Clinton will not embrace the measure unless it is amended to provide more protection for those who depend on the programs.

Republican congressional leaders have expressed a desire to tinker with the governors' blueprint but have praised it in general terms and are moving rapidly to draft legislation based on it.

Republican senators and governors charged that the administration's suggestions would amount to retaining the current system and vowed to plow forward, turning the governors' vision into legislation and pushing it through Congress.

The administration's insistence on major changes could complicate what had appeared to be the best vehicle for resolving a yearlong impasse between the White House and Congress on efforts to reduce future federal spending on benefit programs and give states more authority to administer welfare and Medicaid.

"She [Shalala] is trying to trash a plan that has the best opportunity on a bipartisan basis to do what the president and the Congress and the governors want to do," said Wisconsin Gov. Tommy G. Thompson, chairman of the National Governors' Assn. and a Republican. "To make the changes she wants to make is to go back to the status quo and governors aren't willing to go back."

When congressional initiatives to overhaul both of these massive programs fell victim to battles over the budget, the governors--who had been counting on the flexibility they would gain under the measures--worked out a bipartisan approach. Earlier this month at a National Governors' Assn. meeting, state chief executives voted unanimously in favor of the compromise proposal that Congress is now considering.

Some congressional Republicans want to attach a version of the governors' Medicaid and welfare proposals--as well as changes in other entitlement programs and perhaps some tax cuts--to legislation that would raise the nation's $4.9-trillion debt ceiling, which must be passed by Congress next month. The nation's borrowing needs are now projected to exceed the debt ceiling by about March 21 or perhaps sooner, Treasury Department officials said this week.

If the welfare and Medicaid proposals is not attached to the debt-ceiling measure, Republicans in the House and Senate hope to have separate bills based on the governors' plan on the president's desk this spring.

House Speaker Newt Gingrich (R-Ga.) said that he did not understand how Clinton could oppose the governors' initiative. "It's pretty hard for Clinton to say he's to the left" of Democratic governors, he said.

The welfare portion of the package closely resembles the GOP initiative of last year. It would transfer vast authority to states, which would design their own programs to move people from welfare to work and receive lump-sum block grants from the federal government to fund their new programs. The current guarantee that all eligible recipients nationwide will receive cash assistance would be canceled and benefits would be limited, for most recipients, to five years in a lifetime.

There are some differences between the congressional GOP measure, which Clinton vetoed, and the governors' proposal. The governors' plan would provide more money for child care for the children of welfare recipients who go to work and would permit states to exempt more recipients, up to 20% of their caseloads, from the five-year time limit.

In her testimony, Shalala argued that the proposal would give the governors too much leeway--allowing them to decrease state contributions to welfare programs by as much as 25% without losing federal money--and would not establish a sufficient federal oversight role.

"The [governors'] proposal as it stands needs more protection for children," Shalala told members of the Senate Finance Committee, offering the administration's first detailed response to the plan. "We're opening up Pandora's box with this flexibility."

She said the administration would support the proposal if it were changed to require states to:

* Contribute more of their own money to their welfare programs.

* Provide vouchers for in-kind services for families who are cut off welfare.

* Continue funding welfare programs at current levels if they want to tap into a contingency fund for states facing increases in caseloads because of economic problems.

* Guarantee equal treatment for all recipients.

Republican senators said that Shalala was trying to reinsert into the proposals the federal micromanagement that the governors and Republican congressional leaders are intent on removing.

"The administration wants more federal control than what the governors want," said Sen. Charles E. Grassley (R-Iowa). "The bottom line of that is that welfare as we know it continues."

Sen. Daniel Patrick Moynihan (D-N.Y.), said the governors' plan would strip support from 5 million poor children by 2005, half of them African Americans.

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