[Congressional Record (Bound Edition), Volume 155 (2009), Part 18]
[Extensions of Remarks]
[Pages 24498-24500]
[From the U.S. Government Publishing Office, www.gpo.gov]




    GOVERNORS OF ALASKA, ALABAMA, AND ARIZONA EXPRESS CONCERNS WITH 
                   UNFUNDED MANDATES IN HEALTH REFORM

                                 ______
                                 

                            HON. MIKE ROGERS

                              of michigan

                    in the house of representatives

                       Wednesday, October 7, 2009

  Mr. ROGERS of Michigan. Madam Speaker, I rise today to express 
concerns regarding health reform proposals which would create unfunded 
state mandates. Legislation currently before the House would 
dramatically expand the Medicaid program and place over $35 billion in 
new liabilities on state budgets over the next ten years. In addition, 
these proposals would expand the federal government's role in 
administering Medicaid, which would severely handcuff states' ability 
to run their own programs and preempt state authority to manage 
Medicaid eligibility and benefits.
  Over the last several weeks, governors have expressed concerns over 
these proposals. I would like to submit for the Record the following 
letters from the governors of Alaska, Alabama and Arizona:

                                                September 8, 2009.
     Hon. Max Baucus,
     Chairman, Senate Finance Committee, Hart Senate Office 
         Building, Washington, DC.
     Hon. Charles Grassley,
     Ranking Member, Senate Finance Committee, Hart Senate Office 
         Building, Washington, DC.
       Dear Chairman Baucus and Ranking Member Grassley: States 
     cannot afford to carry the huge costs of health care reform. 
     States (and their businesses and residents) are struggling to 
     recover financially. The National Conference of State 
     Legislatures (NCSL) reports states had a $113 billion dollar 
     budget shortfall in 2009 and the situation

[[Page 24499]]

     is getting worse. NCSL estimates state budget shortfalls will 
     increase to $142 billion in 2010. I am also concerned with 
     the proposed new federal mandates that would undercut state 
     authority over the Medicaid program.
       On fiscal impact, H.R. 3200 expands Medicaid coverage to 
     all citizens under 133 percent of the Federal Poverty Level 
     (FPL) while the Senate HELP committee legislation assumes an 
     expansion to 150 percent of the FPL. The Congressional Budget 
     Office estimates these proposed expansions would require 
     spending hundreds of billions of dollars in new public funds. 
     While the proposals would initially place responsibility on 
     the federal government to pay for expanding Medicaid 
     coverage, a shift would later occur to state treasuries and 
     the impact would be significant. For Alaska, the National 
     Governors Association estimates it would cost $140 million in 
     state general funds to expand Medicaid for all Alaskans up to 
     133 percent of FPL in 2015. (Assuming there is full federal 
     funding the first two years.) This amount would increase to 
     $168 million by 2019, with new state expenditures amounting 
     to billions over time.
       This fiscal hit to states would come on top of the Medicaid 
     funding cliff created by Congress in American Recovery and 
     Reinvestment Act. (ARRA). ARRA established a temporary 
     increase in the Federal Medical Assistance Percentage (FMAP) 
     rate to help states deal with Medicaid costs. This higher 
     FMAP rate is set to expire on December 31, 2010. If the 
     higher FMAP rate is not extended, states will face an 
     immediate and significant increase in costs to operate 
     Medicaid programs. In Alaska, approximately $120 million more 
     in state general funds will be needed to operate the Medicaid 
     program for just one year.
       Further, proposals in Congress would give the federal 
     government a stronger role in administering Medicaid and 
     undercut state authority. Coverage would have to be expanded 
     to childless adults who qualify and would replace the current 
     state option to cover parents of low-income children with a 
     federal mandate to provide coverage to qualifying adults. 
     Maintenance of effort requirements would prevent states from 
     adjusting eligibility to meet ever-changing fiscal 
     conditions. Lower limits of practitioner reimbursement and 
     coverage limits would be imposed. New services and the 
     coverage of additional provider groups would be mandated and 
     state flexibility in the eligibility process would be 
     constrained. All these mandates limit state control and 
     flexibility to control the Medicaid program.
       While I am sympathetic to the dilemma of health care reform 
     and I applaud your efforts to find a solution, I cannot 
     support legislation from Congress that imposes costly 
     unfunded federal mandates on Alaska and other states. 
     Instead, the federal government should be looking for ways to 
     give the states increased flexibility with federal funding to 
     meet the unique needs of each state's population. This tact 
     would lead to innovation and cost-containment as compared to 
     the current rout pursued in existing health care legislation.
           Sincerely,
                                                     Sean Parnell,
     Governor, Alaska.
                                  ____

                                               September 30, 2009.
     Hon. Richard Shelby,
     U.S. Senate, Russell Senate Office Building, Washington, DC.
       Dear Senator Shelby: Democrats and Republicans alike agree 
     that our health care system is in need of reform; however, it 
     appears the proposal you will likely be called to vote on has 
     serious flaws that will have a dire budgetary impact on 
     Alabama. As governor of our state, I am writing to express a 
     specific concern I have about this proposal.
       The Senate and House of Representatives are considering a 
     bill that includes a major expansion of Medicaid and an 
     increase in costs to the states. Our Medicaid Department has 
     reviewed the cost of expanding Medicaid to 150% Federal 
     Poverty Level and determined that it would cost state and 
     federal taxpayers an additional $1.2 billion per year to 
     cover this mandate alone. Unlike the federal government, our 
     state actually has to balance its budget. Given the effects 
     of the current economic condition on our budgets, any 
     additional costs will overwhelm our resources. Expecting 
     states in the current economic climate to provide additional 
     funding for federal mandates is not reasonable or even 
     practical.
       Instead of raising taxes, imposing mandates and charging 
     penalties on small businesses, Congress and the White House 
     may want to consider an approach we have begun to take in 
     Alabama. Small businesses, those with 24 or fewer employees, 
     can now deduct 150% of the money they spend on health 
     insurance premiums from their state taxes, and their 
     employees earning up to $50,000/year can do the same.
       Rather than increasing the size and cost of government by 
     putting more people on Medicaid, and thereby making more 
     citizens dependent on government as Washington appears ready 
     to do, Alabama is trying to reduce the burden of health care 
     costs for the overwhelming majority of its employers and 
     their employees. I believe our state can be looked to as a 
     model for other states.
       Our Medicaid program is a national innovator in the area of 
     medical homes and health information technology. A higher 
     percentage of Alabamians have health insurance than the 
     nation as a whole, and Alabama has a lower percentage of 
     uninsured children than the nation as a whole. In addition to 
     achieving higher rates of coverage, Alabama has some of the 
     nation's lowest health care costs. That is one reason why 
     Alabama has been so successful in attracting national and 
     international companies and the thousands of jobs they have 
     created in our state.
       Not only is health care less expensive in Alabama than just 
     about anywhere else in the country, we are also an open 
     market for insurers. More than 300 companies are licensed to 
     sell health care insurance in our state. We encourage 
     competition and welcome insurers to help in the effort to 
     drive down costs.
       We, as a nation, must address the problems of our existing 
     health care system, but simply unloading them on the states 
     will not work. I thank you for your interest in this very 
     important matter and look forward to working with you to find 
     common sense ways to reform our health care system.
           Sincerely,
                                                        Bob Riley,
     Governor, Alabama.
                                  ____

                                                    July 16, 2009.
     Senator John McCain,
     U.S. Senate, Russell Senate Bldg.,
     Washington DC.
     Senator Jon Kyl,
     U.S. Senate, Hart Senate Bldg.,
     Washington DC.
       Dear Senator McCain and Senator Kyl: Thank you for the 
     opportunity to provide information about Arizona's Medicaid 
     program, the Arizona Health Care Cost Containment System 
     (AHCCCS).
       As you know, Arizona is facing one of the worst financial 
     deficits in the nation and projections show that the State is 
     expected to make a slow recovery. In the meantime, 
     unemployment has continued to increase and counter-cyclical 
     programs like AHCCCS have continued to experience record-
     breaking enrollment. In the last four months alone, AHCCCS 
     has grown by more than 100,000 new enrollees, and July 2009 
     enrollment is almost 17 percent above the same month in 2008. 
     Total enrollment, including our Title XXI KidsCare program, 
     in July reached 1,275,109 members, which is almost 19 percent 
     of the state's total population.
       I am proud that AHCCCS program has served as a model for 
     other state Medicaid programs across the country in terms of 
     cost containment. This is due, in large part, to the fact 
     that AHCCCS is a capitated managed care model and 65 percent 
     of its long-term care members receive home and community 
     based services rather than institutional care. According to 
     the Kaiser Family Foundation, AHCCCS has the lowest per 
     member per year (PMPY) cost among Medicaid programs in the 
     country. The average PMPY costs are: (1) $5,645.52 for acute 
     care; (2) $45,960.72 for long-term care, which is a blended 
     average of our elderly and physically disabled and 
     developmentally disabled programs. The weighted average PMPY 
     cost across all Title XIX groups is $7,182.60.
       I am concerned that the Medicaid expansion proposals being 
     discussed at the federal level do not consider the fiscal 
     difficulties states are facing and are likely to continue to 
     face over the next few years. At the same time as Congress is 
     considering prohibiting states from changing their Medicaid 
     eligibility standards, there have been discussions about 
     establishing a federal floor for Medicaid provider rates, 
     which even further limits state flexibility in setting 
     funding levels. State flexibility has been key to Arizona's 
     success in developing and efficiently managing a Medicaid 
     program that provides high quality care at a low cost.
       Even with our strong cost containment measures, I remain 
     concerned about Arizona's ability to sustain the existing 
     AHCCCS model, let alone a mandatory expansion to 150 percent, 
     regardless of whether the federal government provides full 
     financing of the expansion for the first five years. Medicaid 
     is already an increasing share of state budgets--Arizona's 
     General Fund spending on AHCCCS has increased by 230% over 
     the past ten years, and has risen from 8 percent of General 
     Fund spending in FY 1999 to an estimated 16 percent in FY 
     2009.
       Maintaining this level of spending increases will be 
     difficult, especially given that Medicaid enrollment and 
     costs continue to rise. Moreover, Arizona's revenues are not 
     expected to turn around for several years and, even when they 
     do rebound, we would require significant revenue growth in 
     order to sustain rising expenditures for the existing 
     Medicaid program.
       Attached, please find data responsive to your requests. 
     There is a summary sheet that provides an overview of the 
     information requested, along with several other sheets that 
     provide additional detail. As you know, there are many 
     unanswered questions regarding the proposals. This analysis 
     includes the assumptions that were used to develop the 
     figures, which will obviously change as the proposals are 
     refined.

[[Page 24500]]

       Please do not hesitate to contact my office if you have 
     questions or should require additional information. I share 
     your concern regarding Arizona's ability to expand its 
     Medicaid program and what the long-term fiscal implications 
     will be for Arizona, and I hope you find this information 
     useful as you consider the various proposals that are before 
     you.
           Sincerely,
                                                 Janice K. Brewer,
     Governor, Arizona.

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