The President
The White House
Washington, D.C. 20500

The Vice President
The White House
Washington, D.C. 20500

 

The Honorable Harry Reid
Majority Leader
U.S. Senate
Washington, D.C. 2051

 

The Honorable Mitch McConnell
Minority Leader
U.S. Senate
Washington, D.C. 20510

 

The Honorable John Boehner
Speaker of the House
U.S. House of Representatives
Washington, D.C. 20515

 

The Honorable Nancy Pelosi
Minority Leader
U.S. House of Representatives
Washington, D.C. 20515

Dear Mr. President, Mr. Vice President, Majority Leader Reid, Senator McConnell, Speaker Boehner, and Representative Pelosi:

We know the budget negotiations surrounding the necessity to increase the debt limit involve very difficult choices.  All governors face similar decisions, especially in the face of requirements that we balance our budgets.  We applaud your efforts and hope for timely success.

In January, we wrote to congressional leaders and asked them to work cooperatively with us to reduce deficits, restore fiscal discipline and promote economic growth and long-term prosperity.  We noted that, as governors, we faced collective multi-billion dollar budget shortfalls and recognized that the Congress faced substantial budget issues. We respectfully requested adherence to four principles in work upon state-federal deficit reduction.  A copy of our prior correspondence is attached for your further review.

While we recognize the need to address the federal fiscal imbalance, we do not believe spending reductions should be made disproportionately to state funds or result in merely shifting costs to the states. Any reductions in Medicaid payments to states must include provisions that would enable states to better manage their Medicaid programs.

According to news reports, there are several proposals regarding Medicaid financing that would result in significant and disproportionate cuts to states.  Our highest concerns arise with an undefined proposal to blend various federal matching rates into a single unified rate for each state with the real objective of reducing federal Medicaid spending, and with any proposal that would place further restrictions on the amount of state funds that can be matched to federal funds. 
It has been reported that the target for 10-year total Medicaid reduction is in the neighborhood of $100 billion, or roughly $10 billion a year. That amount is equal to 5% of what states spent on Medicaid in FY 2012.  Given recent reductions in Medicaid enacted by many states, and the severe limitations on further reductions posed by federal maintenance-of-effort requirements and the proposed access regulations, the anticipated federal “deficit reduction” may cause state Medicaid spending to rise even faster without increased flexibility for governors to administer the program to best meet the needs of their individual states.

These proposed federal spending reductions for Medicaid will result in a direct cost shift to states, which will result in reduced Medicaid expenditures, in increased state taxes or reductions in K-12 education, transportation,  and public safety funding. If Medicaid spending is reduced, the most likely (if not only permissible) source of savings would be additional reductions in payments to doctors and hospitals, potentially running afoul of the proposed requirements regarding access.

Make no mistake: these reductions are significant and cannot be absorbed into state budgets or simply passed on to providers of health services for our Medicaid populations.  As governors, we have been partners with the federal government to make due with less during these challenging economic times. These reductions, however, as states are being required to absorb ever-more Medicaid beneficiaries, are unfair and unwise.

We urge you and congressional leaders not to continue to mandate Medicaid program requirements upon states without providing states with the adequate federal funding or federal law flexibility to properly manage this federal-state program.

We want to emphasize that governors are not asking for new spending.  We have just completed work to finalize our states’ budgets and we made tough decisions to reduce important programs.  We respect the difficult work you face; however, we ask that you adhere to our suggested federal deficit reduction principles.  We respectfully request that you consult with governors so that we can provide insight on how desired savings can be accomplished without threatening fragile state budgets.  Essentially, we want our states to be treated in a fair and equitable manner.  We stand ready and willing to work with you and Congressional leaders to identify the solutions necessary to secure our nation’s future.  It is our sincere hope you will call on us. 

Sincerely,  

Governor Christine O. Gregoire
Chair

Governor Dave Heineman
Vice Chair

Enclosure (January 24, 2011 correspondence)