GOP governors want control of the purse strings and leeway to rewrite coverage and payment rules. So far President Barack Obama has turned them down, but he may be forced to give some ground if negotiations to reduce federal debt get serious later this year.
Here are some of the major issues looming over the nation's largest health care program, a federal-state partnership that now covers about 60 million people, including many nursing home residents, people with AIDS and low-income mothers and children:
Q: What do Republican governors want?
A: Ideally, they would like Washington to cut them a big check for Medicaid and let each state decide how best to spend the money. It's called a block grant in government jargon, and though some strings would be attached, it would give states a lot more flexibility than they have now. Republican governors would probably put most Medicaid recipients in some kind of private insurance.
Although the share varies from state to state, Washington pays just under 60 percent of the program's cost on average. For this year, federal taxpayers' share of Medicaid is expected to surpass $275 billion.
Mississippi Gov. Haley Barbour is so confident that he could do better at stretching health care dollars that he's offering the feds what amounts to a rebate. If they give him a block grant, he'd let Washington keep half of any annual adjustments for inflation. Nationally, that would save $10 billion a year in federal spending.
"We shouldn't have to come up here and kowtow and kiss the ring," Barbour told Congress on Tuesday. "Give us a block grant."
They're not likely to get that.
Q: So do they have a fallback?
A: Yes. GOP governors would like Obama and Congress to waive requirements in the new health care law and other legislation that keep them from restricting Medicaid eligibility. Enrollment is one of the main forces driving up Medicaid spending, and it usually jumps in a soft economy.
Altogether, states are facing estimated deficits of $175 billion over the next two years, and Medicaid generally is one of the top three items in their budgets. Their predicament is worse because additional Medicaid funds that Congress had pumped in due to the recession will end later this year.
Q: How does the Obama administration respond to that?
A: As a former Democratic governor of Kansas, Health and Human Services Secretary Kathleen Sebelius says that she feels the states' pain — but they should look elsewhere for cuts.
Democrats point out that most program spending is for the needs of a relatively small share of beneficiaries — those who are sickest, many of them disabled and elderly. Finding more efficient ways to provide care for these patients could save money while helping the beneficiaries themselves lead healthier lives.
Cutting back eligibility for low-income children and parents isn't the answer, said Rep. Henry Waxman, D-Calif. "Those populations are not where the money is."
Sebelius says there are no end of tweaks that states can make to save money, from imposing modest copayments to reworking pharmacy benefits. She has been dispatching special teams of Medicaid bean counters to help states identify potential savings. But her Republican predecessor, Mike Leavitt, says it's just a "charm offensive" by the administration to convince states that Obama is open to their requests.
Q: What will Obama's new health care law do to state Medicaid costs?
A: It will raise them, since Medicaid is expected to cover about half of the more than 30 million people who would gain health insurance under the law starting in 2014.
Advocates for the poor say states still get a bargain. Washington will cover about 95 percent of the cost for those who would be newly entitled to Medicaid: childless adults with incomes just over the poverty line. States will save money because those people won't turn up in emergency rooms without the means to pay. Over time, the federal share would drop to 90 percent.
Q: The governors say there's just too much federal micromanagement driving up costs. Are they wrong?
A: Even Obama seems to agree that the governors have a point here.
Utah Gov. Gary Herbert says he had to go all the way to the president to get approval for an idea that would save about $6 million a year in his state.
Herbert told lawmakers Tuesday that state officials wanted to switch from paper letters to e-mail to communicate with beneficiaries for less money. If all states followed suit, it could save $600 million. But Medicaid bureaucrats in Washington raised obstacle after obstacle. Finally, they turned Utah down — via e-mail.
"We couldn't understand why we were getting a denial," said Herbert.
A frustrated Herbert pitched Obama directly when the governors met the president Monday at the White House.
Within a few hours, Utah got the go-ahead.