States Resist Medicare Funding Provision

The New York Times reported this weekend on the developing issue of state funding for a federal project: Medicare's prescription drug plan.  Controversial in and of itself, Medicare Part D requires contributions by the states, creating potential financial issues for some states.

An excerpt from the NY Times article of July 3:

WASHINGTON, July 3 - States are openly resisting a provision of the Medicare law that requires them to pay billions of dollars a year to the federal government to help finance the cost of the new Medicare drug benefit.

Texas is leading the charge against the requirement, which states see as more onerous than the mandates imposed on them by the 2002 education law, the No Child Left Behind Act.

Gov. Rick Perry, a Republican, has vetoed a $444 million appropriation covering the Texas contribution for the next two years.

In his veto message and in a letter to other governors, Mr. Perry said he objected to the federal requirement in principle and to the way it was being interpreted by the federal Medicare agency.

"For the first time," Mr. Perry said, "state governments would be expected to directly finance federal Medicare benefits with state tax dollars. In effect, states will be billed on a monthly basis for the cost of federal services."

Bush administration officials say the federal Medicare law clearly requires states to make the payments, starting in January. One purpose of the 2003 Medicare law was to relieve states of prescription drug costs for low-income elderly people. But as states do the arithmetic, many have concluded that they will lose money because they must give back most of the savings and will incur new administrative costs.

And a link to the entire article. (free registration required)

Interestingly, the two states discussed the most in the article are the home states of the esteemed editors of this Blog, Texas and Ohio. [jt]