Minnesota fears hefty hit from aiding poor

WASHINGTON - Minnesota and other states are worried that emerging plans to overhaul the nation's health care system could leave them facing a expensive new obligation to cover the poor without the money to pay for it.

As the health care debate speeds toward a climax in Congress, cash-strapped state officials are running the numbers to gauge the impact on their budgets, which are already bleeding red ink from hard economic times.

Minnesota's two U.S. senators, both Democrats, are taking notice. In a letter last week to Senate Democratic leaders, Sens. Amy Klobuchar and Al Franken expressed general support for health care changes that expand Medicaid, the federal-state program for low-income children, pregnant women and disabled people.

But they cautioned that parts of a Senate health care bill could harm states such as Minnesota that have more generous Medicaid eligibility policies. The $829 billion bill, which comes up for a vote Tuesday, would give states with less generous benefits a greater share of federal assistance in order to raise their coverage levels.

"States like Mississippi will receive more federal funding, and we just don't think that's fair," Klobuchar said. "We need to look at this proposal very carefully in terms of the burdens it puts on the states."

Said Franken: "We've been doing the right thing at state expense, and we don't want to be punished for that."

With several health care proposals still in play, the exact toll of the growing Medicaid program in Minnesota remains hard to measure. According to a preliminary analysis by the National Conference of State Legislatures, the state's hit could be as high as $631 million over the next decade.

What is known is that, nationwide, about 11 million uninsured Americans will be able to sign up for Medicaid under the proposed eligibility rules, the biggest expansion of Medicaid since its inception. Without an accompanying massive infusion of federal cash, state officials worry that the crush of new patients could cripple state budgets.

The Minnesota Department of Human Services anticipates 175,000 newly enrolled state Medicaid patients if the Senate version passes.

That potential step is drawing protests from Republican and Democratic governors alike, including Minnesota Gov. Tim Pawlenty.

"The American people deserve to know the true costs associated with the so-called health care reform proposals," said Pawlenty in a statement released last week by the Republican Governors Association, where he serves as vice chairman.

Meanwhile, Tennessee Gov. Phil Bredesen, a Democrat, has called the possible Medicaid expansion the "Mother of all unfunded mandates."

Unease in the states could be another obstacle in the path of President Obama's plan to overhaul the nation's health care system.

A financial loser

"We expect many more people to be enrolled in our programs, and that's where it becomes a financial loser for the state," said Minnesota medicaid director Brian Osberg. "We are talking about millions of dollars."

While the Medicaid program is the largest single source of federal funding in Minnesota, it also required a hefty $3 billion contribution from state coffers last year. All told, the $6.3 billion program in Minnesota covers about 527,000 people.

Pawlenty, who closed a $2.76 billion budget gap through a unilateral and controversial process known as unallotment, argues that the state can ill afford to add to its public health care burden.

"This is bad health care policy and bad budgeting," said Pawlenty spokesman Brian McClung. "If the federal government wants to expand health care access, then the federal government should pay for it."

Those more sympathetic to Obama's health reform agenda say the overriding goal is to reduce health care costs, which would benefit states in the long run.

"We don't have high health care costs simply because we have Medicare and Medicaid," said Steve Francisco, federal policy director for the Minnesota Council of Nonprofits. "High health care costs are a universal problem."

Benefits of expansion

In some cases, Francisco and others argue, national health care reform can plug holes in state budgets. In Minnesota, for example, the expansion of Medicaid could cover more than 35,000 low-income residents who are losing general assistance medical care as a result of Pawlenty's cuts.

Expanded coverage could also benefit hospitals, some of which are on the verge of financial collapse from the growing charity care they must provide to the uninsured.

But state health officials are looking to shed programs, not add new ones. "The demand for services is growing because of the poor economy," said Ann Kohler, executive director of the National Association of State Medicaid Directors. "States are cutting their programs."

The leading health care plan in the House would cover 100 percent of the states' new Medicaid costs for the first two years, and then drop to 90 percent after that. In the Senate bill, the federal government would pick up between 77 percent and 95 percent of the new costs for most states.

Nevada costs covered

Fueling a controversy that has already driven a wedge among the states, Democratic Senate Majority Leader Harry Reid included language that ensures the federal government will pay 100 percent of the costs in his home state of Nevada, along with Michigan, Oregon and Rhode Island - states that have been particularly hard hit by the recession.

Pressed on the deal, Reid took to the Senate floor to say he made "no apologies" for helping his state. But the floodgates are now open for a slew of similar requests, putting even more pressure on the deficit-riven federal budget.

"I can't imagine that other states wouldn't be treated much the same way," Franken said. "So we're going to be fighting for Minnesota."

Kevin Diaz • 202-408-2753