As you know, the President strongly opposed -- and ultimately vetoed -- the congressional approach to Medicaid reform because it did not meet these standards. The Congress voted to repeal the Medicaid program and replace it with a new "Medigrant" program that did not include meaningful guarantees of eligibility or benefits. The Congress also proposed a "block-grant" funding mechanism that breached the 30 year federal partnership with the states to share in changes in state Medicaid spending.

As I mentioned earlier, NGA recently approved the outlines of its own Medicaid reform plan, which has been helpful to the debate. In particular, we have been pleased that the Governors appear to agree with one of the key elements of our plan -- namely that federal financing must be responsive to actual, and often unanticipated, changes in Medicaid enrollment in the states and changes in the economy.

However, while the details of the NGA plan are still not completely fleshed out, we are concerned that the elements of the NGA resolution do not reflect the priorities set out in the President's Medicaid plan in certain areas. These are: (1) the need for a real, enforceable. federal guarantee of coverage to a congressionally- defined benefit package; (2) appropriate federal and state financing; and (3) quality standards, beneficiary protections, and accountability.

The federal guarantee of coverage and benefits

The federal "guarantee" of coverage and benefits is at the core of the federal Medicaid program. Unfortunately, the term "guarantee" has been assigned very different meanings in the context of the current Medicaid debate. When we use the term guarantee in the context of a federal statute like Medicaid, we mean a real guarantee, composed of three interrelated components: definitions of 1) eligibility; 2) benefits, and 3) enforcement.

Eligibility

Let's begin with eligibility. The NGA plan sets out a number of current law groups that states must cover in their plan. However, problems remain in the NGA definition. First, it repeals the current law phase-in of Medicaid coverage for children ages 13-18 in families with income below the federal poverty level -- a bipartisan coverage expansion signed into law by President Bush.

In addition, the NGA resolution repeals the federal standard for defining disability and replaces it with 50 separate state definitions. This has the effect of making Medicaid coverage and benefits for those with disabilities uncertain and variable around the nation. For example, it would be possible for states to use restricted definitions of disability resulting in very limited coverage for populations whose service needs are pronounced and among the most costly. In such situations, we are concerned that narrow state definitions of disability could preclude individuals with HIV, certain physical disabilities, or mental illness, from receiving critically needed services under Medicaid. We should not turn back the clock on those with disabilities by permitting 50 different state definitions for purposes of Medicaid coverage.

It appears that the Governors have retained the linkage between cash assistance and eligibility for Medicaid. However, there are still some outstanding questions that require clarification, including how currently covered populations, like the welfare-to-work eligibles, will be covered after the enactment of welfare reform.

Benefits

Eligibility is only one component of the guarantee -- because the question is eligibility for what -- bringing us to benefits. The NGA resolution lists benefits that are characterized as "guaranteed for the guaranteed populations only." The resolution also says that all other benefits defined as optional under the current program would remain optional, and that there would be an additional set of long- term care options.

This new framework raises several unresolved questions. The first relates to the adequacy of the benefits. Current Medicaid law and regulations already give states substantial flexibility in defining the amount, duration, and scope of benefits, and states have used this flexibility to respond to their unique circumstances. This latitude is tempered by a very reasonable constraint -- benefits must be "sufficient to reasonably achieve their purpose". We have concerns that by specifying "complete" flexibility on amount, duration, and scope, the NGA proposal provides no standard against which to assess the reasonableness of a state's benefit plan. Without a standard, any federal "guarantee" is illusory. We believe the Governors understood this as they acknowledged in their testimony last week that the provision in their resolution on this issue has shortcomings that need to be addressed.

The NGA resolution also is silent on the current law standards of comparability and "statewideness" of services -- among and within eligible groups -- for mandatory as well as optional services. In the absence of further information about such provisions, there is no standard against which the "guaranteed" benefits and potential discrimination against certain groups or diseases can be assessed, and therefore we are concerned about the potential for discrimination against certain groups or diseases.

The NGA proposal also would limit the treatment portion of the Early and Periodic, Screening, Diagnosis, and Treatment (EPSDT) program, so that states need not cover all Medicaid optional services for children. The NGA does not yet specify exactly how this would be done, so it is difficult to assess the impact of the provision -- other than the certainty that some children would not receive treatments despite the clinical recommendations for those services arising from the EPSDT screening and diagnosis process.

Enforcement

The third essential component of the federal guarantee is enforcement. Implicit in the concept of defined populations and defined benefits is the notion of a meaningful enforcement mechanism. A federal cause of action for beneficiaries assures that those seeking a remedy for the deprivation of medical care receive the same due process rights everywhere in the United States. The NGA resolution requires states to provide a state right of action, but eliminates any federal right of action for individuals and providers who assert that a state is violating federal Medicaid laws. The only access to federal court for such claims would be the opportunity to petition the U.S. Supreme Court for review of a decision of a state's highest court.

The NGA provisions pose a number of serious questions and concerns. Under the proposal, we believe Medicaid would be the sole federal statute conferring benefits on individuals with no possibility of federal enforcement by its intended beneficiaries.

Review by federal courts also promotes efficiency. As a practical matter, common sense tells us that those aspects of the Medicaid program that are common to all states should be subject to consistent interpretation and administration. When the same question arises across multiple jurisdictions, decision-making in the federal court system maximizes efficiency and predictability. This is particularly true when Medicaid interacts, as is often the case, with other federal statutes (such as Medicare, Social Security, SSI and AFDC). Federal courts are more experienced in analyzing these federal programs and are better able to understand and decide cases involving relationships among them. When courts are being asked to interpret statutory provisions that apply to all participating jurisdictions, we should not construct a system that will encourage different outcomes in different states.

Suits against states filed by providers over payment rates have caused the greatest problem to the states. Under the Administration's plan, the Boren Amendment and related provider payment provisions would be repealed, thereby eliminating these causes of action by providers. Thus, under the Administration's plan, state concerns about limiting their exposure to suit in federal court would be resolved largely.

On balance, when we assess the three components required to make any guarantee real -- the definitions of eligibility, benefits, and enforcement in the NGA resolution -- we continue to have concerns because the federal guarantee of Medicaid coverage and benefits does not appear to be real and enforceable for recipients.

Financing

The second key issue is the financing contained in the NGA resolution. The NGA resolution would replace the current financing system with a combination of a fixed federal payment and a payment adjustment for unexpected increased enrollment. The Governors' financing mechanism has the potential to be creative and a workable formula that constrains growth without providing incentives to drop coverage. Their funding approach, which ensures Medicaid dollars increase with enrollment, represents a constructive addition to the debate. As the Governors have noted, however, these provisions must be fleshed out in much greater detail before anyone can assess whether the financing actually flows based on changes in enrollment and the economy.

The NGA proposal also includes two changes in the state share of financing Medicaid. The minimum federal contribution to the financing of Medicaid would increase from 50 percent to 60 percent, and states' use of provider tax and donation financing mechanisms would once again be unconstrained.

While these proposals are appealing to many states, they raise significant concerns. Depending on the overall structure of the program and on state decisions about program spending, raising the minimum federal match rate from 50 percent to 60 percent either could result in significant increases in federal spending, or reductions in state contributions to Medicaid -- and in total Medicaid funding for health care. For example, an a Medicaid spending growth rates up to well over 20 percent. The Congress wisely enacted limits on these mechanisms that remain appropriate today.

In addition, the NGA proposal treats American Indians and Alaska Natives (AI/ANs) in its category of "special grants" that includes "grants to certain states to cover illegal aliens and to assist Indian Health Service and related facilities in the provision of health care to Native Americans". Native Americans have a unique status in that they have a government to government relationship with the United States that distinguishes them from other special populations. Based upon this legal status, they are entitled to benefits promised under federal treaties and trust responsibilities and to any benefits for which they are otherwise eligible as U.S. citizens. The NGA resolution regarding Indian Health services does not acknowledge this legal relationship, nor does it recognize the fact that American Indians possess dual citizenship. They are citizens of both the state and their tribe. The NGA resolution does not recognize the state government's responsibilities to American Indian citizens. We are concerned by policies which make the federal government the sole provider of health care to American Indians and Alaska Natives and abrogate the right of these citizens to participate in state funded services on the same basis as any other state citizen.

Finally, we all have to examine the NGA proposal and financing structure in the conte Medicaid spending growth rates up to well over 20 percent. The Congress wisely enacted limits on these mechanisms that remain appropriate today.

In addition, the NGA proposal treats American Indians and Alaska Natives (AI/ANs) in its category of "special grants" that includes "grants to certain states to cover illegal aliens and to assist Indian Health Service and related facilities in the provision of health care to Native Americans". Native Americans have a unique status in that they have a government to government relationship with the United States that distinguishes them from other special populations. Based upon this legal status, they are entitled to benefits promised under federal treaties and trust responsibilities and to any benefits for which they are otherwise eligible as U.S. citizens. The NGA resolution regarding Indian Health services does not acknowledge this legal relationship, nor does it recognize the fact that American Indians possess dual citizenship. They are citizens of both the state and their tribe. The NGA resolution does not recognize the state government's responsibilities to American Indian citizens. We are concerned by policies which make the federal government the sole provider of health care to American Indians and Alaska Natives and abrogate the right of these citizens to participate in state funded services on the same basis as any other state citizen.

Finally, we all have to examine the NGA proposal and financing structure in the context of the effort by the President and the Congress to achieve a balanced budget in seven years. We do not yet know whether this plan will achieve the scoreable savings that are required under the President's balanced budget plan -- or under the congressional proposals. If it does not, it would have to be modified to produce savings. Otherwise, other portions of the budget would have to be revised to bring the budget into balance.

Protections for beneficiaries and taxpayers

The NGA resolution would repeal title XIX and create a new title for the Medicaid program. This has the effect of seriously compromising the framework for quality standards, beneficiary and family financial protections, and program accountability.

The NGA resolution is silent in many areas. In other areas where the resolution is specific, some long-standing protections would be reduced or eliminated. For example, the NGA resolution eliminates the federal role in monitoring nursing home quality assurance. Yet without federal monitoring and enforcement of state and facility compliance, the bipartisan uniform quality standards established by the Omnibus Budget Reconciliation Act of 1987 could be undermined significantly.

The NGA resolution makes no mention of quality assurance requirements or monitoring responsibilities for Medicaid managed care. This is a particularly important area since Medicaid managed care enrollment is increasing so dramatically -- about one-third of beneficiaries are now in managed care. a 140 percent increase in enrollment over the past three years. The President's plan recognizes the need for updating managed care quality standards. It repeals some outdated approaches and requires states to establish a quality improvement program that must include developing appropriate standards for Medicaid-contracting health plans and using data analysis to track utilization and managed care outcomes.

Finally, the NGA resolution does not clearly address beneficiary and family financial protections such as spousal impoverishment and family responsibility protections that have been central to the Medicaid program for some time. The NGA resolution also does not address the imposition of co-payments and other cost sharing for Medicaid beneficiaries. Further clarification in all of these areas is needed, because these are central elements of the financial security that Medicaid provides today for beneficiaries and their families.

Conclusion

Let me conclude by focusing on one fundamental structural issue -- whether we approach the task of Medicaid reform by making changes in the current title XIX of the Social Security Act, or by repealing that program and replacing it with a new title. We support reform, not repeal, of Title XIX. The potential unintended consequences of repealing and replacing this program are staggering -- for states, beneficiaries, providers, and the federal government, especially when you consider that it would reopen thirty years of settled litigation. The Congress can address many of the most pressing concerns about any Medicaid reform plan by amending the current law.

From the beginning of the current Medicaid debate, the President has maintained that Medicaid must be financed through a federal-state partnership that ensures federal funding and provides a real, enforceable guarantee of coverage for a defined package of health and long-term care benefits. The President's plan proposes unprecedented new flexibility for the states in how to operate their programs, pay providers, and use managed care and other delivery arrangements, while retaining and revising key standards related to quality and beneficiary financial protections. The President's proposal would achieve those objectives in a way that would also help contribute to a balanced budget by 2002. We believe that the NGA resolution has made a significant contribution to our mutual efforts to reform the Medicaid program. We look forward to working with the Governors, Members of Congress, consumer groups, health care providers. and other interested parties in the near future on this important issue.

WELFARE REFORM

Now I would like to turn to welfare reform. Let me start by reiterating some points the President made in his State of the Union address. Welfare caseloads have declined by 1.4 million since March of 1994 -- a decline of 10 percent. A larger percentage of those still on the rolls are engaged in work and related activities. Fewer children live in poverty. Food stamp rolls have gone down. Teen pregnancy rates have gone down. At the same time. child support collections have gone up, as the Administration has improved state collection efforts, the IRS's seizure of income tax refunds, and the ability of the federal government to make federal employees accountable for the support they owe their children.

Over the last three years, we have worked with governors and elected officials to give 37 states the flexibility to design welfare reform strategies that meet their specific needs. This Administration has encouraged states to find innovative ways to move people from welfare to work and to promote parental responsibility, and these efforts already are making a difference for more than 10 million recipients throughout the country. States, led by Governors of both parties, now are demanding work, time-limiting assistance; requiring teens to stay in school and live at home; and strengthening child support enforcement.

President Clinton also has worked with the Congress to expand dramatically the Earned Income Tax Credit to make work pay over welfare. This program, which President Reagan said was the most pro- family, pro-work initiative undertaken by the United States in the last generation, meant that, in 1994, families with children with incomes under $28,000 paid about $1,300 less in income tax than they would have if the laws hadn't been changed in 1993.

Yet, as the President said in January, we should take advantage of bipartisan consensus on time limits, work requirements, and child support enforcement to enact national welfare reform legislation. The President has consistently called for bipartisan welfare reform and the Administration applauds the way Republicans and Democrats came together to put forth the NGA recommendations. As you may recall, the President started us down this road when he brought together a bipartisan group of congressional leaders, Governors, and federal and local officials to discuss welfare reform at the Blair House last year.

We all want welfare reform that promotes work, requires responsibility, and protects children. Real welfare reform is first and foremost about work: requiring recipients to make the transition into the work force as quickly as possible and giving them the tools they need to enter and succeed in the labor market. This will require a change in the culture of welfare offices so that every action provides support and encouragement for the transition to work.

The President, as part of his balanced budget plan, has proposed a balanced approach to welfare reform that achieves these goals. It replaces welfare with a new, time-limited, conditional entitlement in return for work and gives states new flexibility to design their own approaches to welfare reform. Within two years, parents must go to work or lose their benefits, and after five years, benefits end. The plan provides vouchers for children whose parents reach the time limit, and protects States in the event of economic downturns or population growth. It also has tough child support enforcement measures and preserves the national commitment to nutrition assistance, foster care, and adoption assistance, preserving states' ability to respond to growing caseloads.

The Administration will continue to judge legislation adopted by the Congress on the basis of whether it promotes work, responsibility, and family, and protects children. And, following the example of the NGA and the Senate last fall, we strongly hope for legislation that will be endorsed by a majority of Democrats and Republicans in both chambers of Congress.

The NGA proposal makes numerous modifications to the conference welfare bill--many of which, if adopted by the Congress, would be improvements. Some of NGA's recommendations fall short and should be improved.

On the positive side, the NGA proposal reflects an understanding of the child care resources states will need in implementing welfare reform. By adding $4 billion for child care above the level in the conference report for H.R. 4, the NGA proposal acknowledges that single parents can only find and keep jobs if their children are cared for safely. The additional investment is essential to ensure that child care resources are available for those required to move from welfare to work and -- equally important -- to ensure that child care is available for low income working families at-risk of welfare dependency. We are troubled, however, that the NGA proposal fails to include Senate provisions for ensuring safe and healthy child care, and that the increased federal spending does not require a state match.

By adding $1 billion to the H.R. 4 contingency fund and allowing states to draw fends if poverty rises, the NGA proposal properly recognizes that states may experience unexpected changes in population or downturns in their economy. In the event of a national economic downturn, however, even a $2 billion contingency fund might be exhausted quite rapidly. During the last recession, for example, total AFDC benefit payments rose from $17.2 billion in 1989 to $21.9 billion in 1992, a $4.7 billion increase over the base year in one year alone. A provision should be added to the bill allowing states to draw down matching dollars during a national recession even if the $2 billion in the contingency fund has been expended. We also believe the trigger mechanism should be improved to ensure greater responsiveness to the states' need for additional resources.

The NGA proposal also would eliminate the requirement in the Senate bill that states meet their full 1994 level of effort in order to be eligible for the contingency fund. The removal of this requirement would allow a state to draw down additional federal dollars while actually reducing its own contribution to the family assistance program. It is difficult to understand why a state in need of contingency fund dollars to meet the demand for assistance would simultaneously be allowed to cut its own spending on poor families below the 1994 level. We support restoring the contingency fund maintenance of effort provision contained in H.R. 4.

The NGA proposal also properly recognizes the importance of child support enforcement to welfare reform. Last year, the President insisted that welfare reform include the toughest child support enforcement reforms in this country's history. Since then, Republicans and Democrats have worked together in a bipartisan spirit and included all of the major proposals for child support enforcement reform that the President requested: streamlined paternity establishment, new hire reporting, uniform interstate child support laws, computerized statewide collections, and drivers license revocation. We applaud the efforts of the NGA and the members of this Committee for their hard work on the child support enforcement provisions. It has been bipartisanship at its best.

On Food Stamps, the NGA proposal makes two important improvements to the H.R. 4 conference bill. First, it does not impose a funding cap on the Food Stamp program as the conference bill did. A cap on Food Stamp spending would jeopardize the ability of the Food Stamp program to get food to people who need it. Second, the NGA proposal protects families with relatively high shelter costs -- mostly families with children -- by adopting the Senate's approach to the program's deductions from income.

The NGA proposal also makes substantial improvements to the performance bonus provisions in the conference agreement by establishing a separate funding stream to pay for bonuses -- rather than allowing states to reduce their maintenance of effort. It makes modifications to the work requirements to make them more feasible and less costly for states to meet. In particular, the Administration is very supportive of provisions that allow part-time work for mothers with pre-school age children and that reduce the maximum number of hours per week from 35 to 25.

The Governors' proposal also is noteworthy because it limits proposed cuts to the Earned Income Tax Credit. We cannot be serious about welfare reform if we cripple the primary work incentive for low- income parents. Along with child care and health coverage, the EITC is vital to helping people move from welfare to work.

Finally, the Administration is supportive of several provisions that the NGA adopted from the Senate-passed bill -- a 20 percent caseload exemption from the time limit for battered women, women with disabilities and others who may need a hardship exemption; a state option to implement a family cap; and requirements that teen mothers live at home and stay in school.

The Federal-State Partnership

While the NGA proposal improves on the conference bill in a number of ways, the Administration has serious concerns about several provisions. While it is critical that states have the flexibility to design programs to meet their specific needs, it is equally essential that the federal government ensure accountability in the use of tax dollars and make certain the safety net for poor children is maintained. The federal-state match system under current law always has been the "glue" that holds this partnership together and was part of the welfare reform plan the Administration proposed as part of its balanced budget plan.

A serious concern about the NGA proposal generally is that the federal-state partnership is severely weakened. As I have already mentioned, the Administration prefers the provision in the Senate bill that requires 80 percent maintenance of effort of the 1994 level, and a requirement for a 100 percent maintenance of effort for access to the contingency fund. We also oppose the NGA provision allowing a state to transfer up to 30 percent of its cash assistance block to other programs such as Title XX, the Social Services Block Grant. Since most states spend considerable state dollars on social services, this transfer effectively permits substitution of federal dollars for state dollars.

The problem is exacerbated in the Governors' proposal by the fact that the additional $4 billion in child care funds requires neither a state match nor even maintenance of the FY 1994 level of state effort on child care.

In total, these provisions imply that states could, by law, reduce their spending substantially under the MOE and transfer provisions while federal spendink grants current entitlements for adoption, foster care, independent living and family preservation. With disturbingly uneven state performance in this area, it also is troubling that the NGA's proposed redesign of the nation's child protection system fails to include a mechanism to enforce protections vital for the lives and well-being of abused and neglected children. The NGA proposal also would block grant important programs focused on prevention of child abuse and neglect. If the system includes no targeted prevention funding, crisis-driven decision-making may deplete resources for prevention.

Food Stamps and Child Nutrition. On behalf of the Secretary of Agriculture, I'd like to discuss a few issues relating to the nutrition programs. While the NGA agreement does include some improvements to the conference report's provisions on Food Stamps, the NGA proposal did not go as far as it should, and serious concerns remain:

• The NGA proposal continues to provide a state option fafety net for poor children. Federal and state child protection programs provide an essential safety net for the nation's abused, neglected and adopted children, and children in foster care. As we embark upon bold new welfare reform initiatives, it is critical to maintain a strong child protection system for these extremely vulnerable children. Unlike the Senate's bipartisan approach to child protection, the NGA proposal jeopardizes this essential safety net by allowing states to replace with block grants current entitlements for adoption, foster care, independent living and family preservation. With disturbingly uneven state performance in this area, it also is troubling that the NGA's proposed redesign of the nation's child protection system fails to include a mechanism to enforce protections vital for the lives and well-being of abused and neglected children. The NGA proposal also would block grant important programs focused on prevention of child abuse and neglect. If the system includes no targeted prevention funding, crisis-driven decision-making may deplete resources for prevention.
  
  Food Stamps and Child Nutrition. On behalf of the Secretary of Agriculture, I'd like to discuss a few issues relating to the nutrition programs. While the NGA agreement does include some improvements to the conference report's provisions on Food Stamps, the NGA proposal did not go as far as it should, and serious concerns remain:
  
  
• The NGA proposal continues to provide a state option for a Food Stamp block grant. The nutrition and health of millions of children, working families, and elderly could be jeopardized if many states took advantage of this option, as they might under the terms contained in the proposal. Although the Administration is committed to simplification and increased flexibility in the Food Stamp program, we are strongly opposed to a Food Stamp block grant.
  
  
• In addition, the NGA proposal continues the proposed Simplified Program to households which receive both Food Stamps and AFDC. While the Administration supports a Simplified Program and has developed its own proposal, the NGA proposal undermines national standards that work and creates a hidden cost for states.
  
  
• The NGA proposal severely time limits Food Stamp receipt for many unemployed adults. Anyone who is not willing to work should be removed from the program. But those who are willing to work should have the opportunity and the support necessary to put them to work. Many who are willing to work could lose their Food Stamps because states are unwilling or unable to provide sufficient work and training opportunities. Without resources to provide work opportunities, states could face the burden of caring for thousands of people who have lost nutrition assistance.
  
  
• The NGA proposal retains the conference bill's provision for school nutrition block grant demonstrations. The block grant demonstrations would undermine the program's ability to respond automatically to economic changes and to maintain national nutrition standards.

Guarantees of fair and equitable treatment. The NGA proposal does contain a requirement that states set forth and commit themselves to objective criteria for the delivery of benefits and fair and equitable treatment. This is an improvement over the conference bill, which contained no guarantees that states would commit to objective eligibility and other criteria and promptly and equitably serve those who met them to ensure that applicants and recipients are not subject to arbitrary treatment -- for example, being placed on waiting lists - state plans should be explicit, contain certain elements, and bind the states to their commitments. Among those commitments should be applications, eligibility and sanctions criteria, and procedures and time frames for decisions. Moreover, statewideness and equity across families in each state must be the goal. Applicants and beneficiaries should be told the reasons for decisions on their rates. Mistakes in the administration of the program should be correctable. Once these objectives are met, applicants, recipients and other taxpayers in each state will understand the benefits and concomitant responsibilities under their state plans.

Restrictions On Benefits To Immigrants

The recent NGA proposal does not address the immigrant provisions included in the H.R. 4 welfare reform conference bill. That bill would have banned most legal immigrants. including the disabled, the elderly, and children, from receiving means-tested benefits. It also would have excluded illegal aliens from all child nutrition benefits, creating an unprecedented local administrative burden and ultimately denying benefits to millions of eligible children. This provision alone would require all 45 million students enrolled in participating schools to document their citizenship to participate in the federally- supported school lunch program, placing an enormous administrative burden on local school systems.

The Administration opposes deep and unfair cuts in benefits to legal immigrants.

Instead, the Administration strongly supports strengthening and enforcing sponsor responsibility for immigrants, by extending deeming provisions until citizenship. It is particularly important to note that the NGA, in its letter to the welfare conferees dated October 10, 1995, specifically supported the deeming approach of the Administration and opposed the banning provisions in H.R. 4. We are deeply concerned that the legal immigrant provisions of H.R. 4 will represent an enormous cost shift to certain states, as well as to federal taxpayers, leaving state and local governments solely responsible for assistance to legal immigrants.

In short, the NGA welfare proposal represents an important bipartisan step forward in enhancing the ability of the states to reform welfare by promoting work, encouraging parental responsibility and protecting children. It needs to be improved in important ways. We look forward to working in a bipartisan way to build on the improvements that have been made and to achieve welfare reform of which we can all be proud.