By David Morgan
WASHINGTON (Reuters) - With billions of dollars in Medicaid spending at risk in Congress, states are forming a loose confederacy to oppose any federal cuts that could damage state budgets already awash in red ink.
The "red" and "blue" states that mark America's political divide between conservative and liberal sympathies are often far apart on issues involving healthcare, including Medicaid, the $420 billion-a-year program for the poor.
But lobbyists say governors, legislators and other state officials, Republican and Democrat alike, have found common ground in a push to convince a special congressional deficit panel that White House-backed Medicaid cuts totaling $41 billion will only weaken a system that already struggles to deliver care to 60 million beneficiaries.
The 12-member bipartisan panel, dubbed the "super committee" because of its powers, is tasked with finding $1.2 trillion in savings to cut huge U.S. deficits. The full Congress is due to vote on their recommendations by late December.
State officials appear most unified on an alternative cost-cutting strategy, which they say could save more than $100 billion by changing the healthcare delivery system for the poorest, sickest and most costly patients. Known as "dual-eligibles," they qualify for both Medicaid and Medicare, the government-run program for the elderly.
There are about 9 million dual-eligibles and state officials see billions of dollars in savings from shifting them into managed care plans better able to eliminate unnecessary doctor's visits, tests and hospital admissions.
"Support for that proposition is very broad," Maryland Governor Martin O'Malley, who chairs the Democratic Governors Association, told Reuters.
States also hope the super committee will adopt proposals to control Medicaid prescription drug costs, combat waste and fraud, and relax federal restrictions on benefits and eligibility, lobbyists said.
HEAD IN THE SAND
The current lobbying effort is expected to reach critical mass in October, when Democratic and Republican governors are due in Washington for separate initiatives that include private meetings with super committee members.
Medicaid and Medicare are central to the deficit debate between Republicans in Congress and President Barack Obama, who has vowed to veto any bill that would require sacrifices from the old and frail while allowing the wealthy to avoid taxes.
Medicaid is also key to the success of the 2010 U.S. health reform law, the centerpiece of Obama's domestic policy agenda, which calls for coverage to be extended to 16 million uninsured Americans who currently do not qualify as beneficiaries.
States, healthcare providers and beneficiaries lobbied successfully last summer to spare Medicaid from automatic cuts that would be imposed if the super committee failed to reach agreement by November 23.
This time, states may be less unified on larger questions about the future of Medicaid because of partisan differences including a Republican push to repeal Obama's health reforms and convert Medicaid into a block grant program with few federal rules, both of which Democrats oppose.
But they are not only pushing back against potential cuts.
"That's a head-in-the-sand approach. But there are ways to look at Medicaid changes -- some of which would be helpful and some of which would make the problem worse," said Matt Salo of the National Association of Medicaid Directors.
States are out of step with healthcare industry and consumer groups who hope the super committee will deadlock. A deadlock would trigger spending cuts that would spare Medicaid and impose only modest reductions on Medicare.
States oppose the triggers because they would cut up to $35 billion from discretionary federal grants for education, public health and other programs, according to Federal Funds Information for States, a Washington research group sponsored by governors and state legislatures.
The sprawling Medicaid program, funded jointly by federal and state governments, is a fiscal albatross for many states still struggling with recession-induced deficits. Persistent joblessness is swelling the ranks of the needy and tax increases remain politically unfeasible.
U.S. states ended their last fiscal year on June 30 with an aggregate deficit of about $100 billion, with Medicaid accounting for nearly one-quarter of their spending, according to the Center for Budget Policy and Priorities, a Washington think tank.
State officials complain Medicaid is a problem because federal mandates make it hard for governors and lawmakers to address costs by adjusting benefits and eligibility.
At issue in Congress are two proposals that Obama forwarded to the super committee last week. One would force a $15 billion reduction in federal Medicaid contributions to states by altering the formula used to set Washington's matching rate.
The second would curtail states' ability to raise money through taxes on Medicaid providers, a key source of revenue for state contributions. That measure would cost states $26 billion, and has already drawn criticism.
Healthcare lobbyists believe Republicans on the panel have a strong political incentive to embrace the proposals because they call for reductions in entitlement spending and carry a Democratic president's endorsement.
"Every state is in agreement that if all the federal government does to reduce its deficit is push costs and mandates onto the states ... it's really a nonstarter," said Tony Keck, director of Health and Human Services in South Carolina, a state at the forefront of opposition to Obama's health policies.
Advocacy groups that represent Medicaid beneficiaries also oppose federal funding cuts. But with many states already cutting back on Medicaid, they warn that managed care plans for dual-eligibles and added flexibility for state governments could endanger the quality and breadth of care on which some of America's most vulnerable citizens depend.
(Editing by Todd Eastham)