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Feds give states a menu for cutting Medicaid

Answering a fiscal 911 call from the nation’s governors, the Obama administration Thursday gave cash-strapped states a menu for cutting Medicaid spending, one of their biggest budget headaches.

It didn’t have one item that many governors, particularly Republicans, are looking for.

In a letter to governors, Health and Human Services Secretary Kathleen Sebelius was cool to the idea of cutting beneficiaries from the Medicaid rolls by restricting eligibility, as Arizona has requested and other states are considering.

Instead, Sebelius urged states to find savings through other approaches, including charging higher copayments for some services, limiting certain benefits, managing high-cost patients more efficiently, squeezing drugs costs, and cracking down on improper payments.

Medicaid covers more than 50 million low-income people, including 1 in 4 children, and most seniors and disabled patients in nursing homes. Although Washington pays an average of close to 60 cents of every $1 spent on the federal-state program, Medicaid is generally the first or second most expensive item on state budgets.

States are facing a budget shortfall of roughly $175 billion over the next two years. Money from President Barack Obama’s stimulus bill runs out this year. And the easy budget cuts have already been made.

Republican governors have urged the administration to waive or change a series of federal requirements that states maintain Medicaid enrollment levels. Arizona has formally asked permission to cut some groups of people from the coverage rolls.

In her letter, Sebelius did not directly address questions about waivers, saying she is reviewing what legal authority she has to grant them, if any. To make matters more complicated, there are various kinds of waivers and rules for issuing them.

But she did promise that experts from her department would spare no effort to help states find savings.

“We are committed to responsiveness and flexibility, and will expedite review of state proposals,” Sebelius wrote. “My team stands ready to come to your state to discuss your priorities and how we can help achieve them.”

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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