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Washington wary of gov.'s health plan

Schwarzenegger wants $3.7 billion in new federal funding. But a conflict could arise over Bush's efforts to balance the budget.

January 30, 2007|Ricardo Alonso-Zaldivar | Times Staff Writer

WASHINGTON — Gov. Arnold Schwarzenegger wants $3.7 billion a year in new federal funding to cover a big chunk of his healthcare plan for Californians, putting him on a collision course with budget hawks in the nation's capital and leaders in other states seeking assistance.

The sheer size of the federal allocation Schwarzenegger's plan would require is raising eyebrows.

"That's a big number on an annual basis," said Sen. Judd Gregg of New Hampshire, the ranking Republican on the Senate Budget Committee. "California hasn't yet passed a law [implementing the governor's plan], but when they do, I would think people are going to take a deep breath."

The cost of helping states fund their health plans has already attracted the attention of budget cutters because it is complicating President Bush's stated goal of balancing the federal budget in five years. In his new budget, scheduled to go to Congress on Monday, Bush is expected to call for a substantial slowdown in federal healthcare spending. Some of the cuts Bush proposes could affect programs Schwarzenegger is counting on to help pay for his plan, such as Medicaid.

Because California is the most populous state, its plan is by far the largest. But four other states are pursuing initiatives to provide health insurance for all their residents. More are expected to follow this year. That could set off a scramble for increasingly scarce federal dollars.

"When they do the math and figure out just exactly how much federal money will be flowing to California ... some people will say, 'Why should California get it, and other states get nothing?' " said health economist Len Nichols of the nonpartisan New America Foundation.

Nichols and other experts say state attempts to reform healthcare are likely to require tens of billions in additional spending in two federal programs that operate as partnerships with the states -- Medicaid and the State Children's Health Insurance Program, or S-CHIP. These programs are different in every state, and operate under a complex series of laws, rules and formulas for federal matching funds.

Medicaid is the nation's main healthcare program for the poor, paying for medical and long-term care for more than 55 million people, according to the Kaiser Family Foundation. S-CHIP covers as many as 6 million children a year, mostly in low-income working families that earn too much to qualify for Medicaid. In California, the programs are known as Medi-Cal and Healthy Families.

Washington may struggle to deal with demands for more money from California and other states, but some experts say federal policymakers in effect asked for it after years of little or no action to address the problems of the 47 million uninsured.

"The reason this is being discussed in a serious way in Sacramento is because it really isn't being confronted in Washington," said Marian Mulkey, a health insurance expert with the California HealthCare Foundation. "If [Washington] reacts negatively, it might just call the question of 'What do they want to do next?' What is Washington doing to address this, if this kind of state solution isn't workable?"

Last week, Bush pledged in his State of the Union address to work with states to cover the uninsured. But that included no commitment for more federal money -- only redirection of some existing accounts.

Overall, Schwarzenegger counts on federal coffers to provide about $5.5 billion of the $12-billion first-year cost of his plan. Of that federal money, state officials say, $3.7 billion would be new spending and the rest would be redirected from existing payments.

California officials say the state is entitled to nearly all of the $3.7 billion in new spending under current Medicaid and S-CHIP rules.

Medicaid is an entitlement program, meaning it is not subject to Congress' annual appropriations process. Instead, the federal government has committed by law to match state spending within given limits. The coverage expansions that Schwarzenegger is proposing for low-income children, pregnant women and some other adults are within those limits, state officials say, as are increases in payments to healthcare providers that the governor's plan calls for.

"Given the fact that most of these things fall within the existing laws and rules, we hope that we'll ultimately be successful in securing the funding," said Joe Munso, deputy director of the California Health and Human Services Agency. "The federal government is a key partner in any of these solutions. They are a key partner in our programs today."

However, Congress can change the underlying Medicaid law to cut spending on the program -- and it might come under pressure to do so, given that demands from California and other states are likely to add to the federal deficit.

At the U.S. Health and Human Services Department, an official said it was not as simple as California sending the federal government a bill.

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