The two sides have previously floated similar proposals to raise monthly premiums for upper-middle class and wealthy retirees. There's interest in changing Medicare's co-payments and deductibles in ways that would protect the sickest beneficiaries but would probably raise costs for others. And while Obama has backed away from raising the eligibility age, he does seem willing to treat new beneficiaries differently by asking them to pay more for some services.
Medicaid, the program for the poor, covers about 60 million people, roughly one in five Americans. It's a diverse population that includes many low-income youngsters and their mothers but also the frailest seniors in nursing homes. The program is different in every state. Nationally, Washington pays an average of 58 cents of every dollar in Medicaid benefits. Total Medicaid costs are well over $400 billion a year.
Under Obama's overhaul, Medicaid would be expanded to bring in low-income adults, mainly people with no children at home but also some parents. In states that accept the expansion, those making up to 138 percent of the federal poverty level -- about $15,400 for an individual -- would be entitled to receive Medicaid. The federal government would pay 100 percent of the expansion's cost for the first three years, starting in 2014. Washington's share would gradually phase down to 90 percent.
So far, 20 mostly Democratic states plus Washington, D.C., have said they plan to take the expansion. Thirteen Republican governors have flatly rejected it. And an additional 17 states are weighing options, with some actively negotiating with Sebelius to see if the new enrollees can be covered through private plans.
Two budget proposals previously pushed by the administration were seen as threats by states. One idea would have allowed Washington to more easily dial its share of Medicaid costs up and down. Another would have curbed an arcane, though widely used, practice through which states "tax" medical service providers, only to return the money to them while drawing more federal matching funds.
The administration had already retreated on the idea of a new mechanism for dialing down reimbursement rates, and Pollack said curbs on provider taxes are also out.
James Capretta, a health policy expert at the socially conservative Ethics and Public Policy Center in Washington, said he doubts the administration's Medicaid budget strategy will convince many governors hardened by a long tug-of-war with the feds over the program. But at least it won't aggravate matters for Obama.
"There's no doubt that as a tactical matter they've thought about this," Capretta said. "They'd rather not create another headache with governors at this point in time."