The nation’s governors are in town preparing to engage federal policymakers in a range of their concerns and problems related to “federalism.” However, there are success stories related to that partnership, such as the effort to reduce the uninsured rate among children through the Children’s Health Insurance Program (CHIP) and Medicaid. In fact, those two programs have worked in tandem to cut the uninsured rate for children by more than half, or to less than 10 percent, over the past decade.

Unfortunately, this model of success for children is being challenged by some governors, who are pushing for repeal of the maintenance of effort (MOE) provision that was included in health reform that requires states to maintain coverage levels within both Medicaid and CHIP through at least 2014. Repealing the MOE would undermine the goal of health reform and the creation of CHIP in the first place, which is to expand coverage and reduce the number of uninsured in our country. In fact, over 14 million children would be put at risk by such a change.

As an example, Arizona Governor Jan Brewer has proposed outright repeal of CHIP in Arizona if the MOE were lifted. It shouldn’t take a budget or health care expert to recognize that balancing budgets on the backs of children doesn’t add up to a positive future for the next generation or our country.

Fortunately, there is another and possibly even better policy option available. That option would be to either repeal or phase-out a very different MOE or the “clawback” that was included in the Medicare prescription drug bill in 2003. That clawback completely inverts the funding relationship whereby the federal government provides funding to states to achieve a policy goal, and instead, requires states to pay the federal government over $7 billion in 2011 to help subsidize Medicare. Although states are raising the money and accountable to taxpayers for these funds, they are denied any control or discretion over how the money is spent.

The clawback was not initially in either the House or Senate bills, but it was added in conference to offset some of the cost of the bill. In fact, the Congressional Budget Office estimated the clawback would cost states $124 billion from 2006 to 2015. Such a system undermines the tenants of cooperative federalism, as states simply do not have billions of dollars in Medicaid dollars at their disposal to transfer to the federal government to subsidize federal programs such as Medicare, particularly in this fiscal environment.

Furthermore, the clawback is simply poor public policy. For one, the federally-imposed clawback established a per beneficiary amount that states must pay based on 2003 levels of spending for drug assistance that is inflation adjusted and increased at two to three times more per low-income senior citizen in states, such as Connecticut, Florida, Illinois, Kansas, Maryland, Minnesota, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, Washington, and Wyoming than in Mississippi, Arizona, or Arkansas. This permanently “punishes the pioneers” by creating rather enormous and possibly permanent inequities among the states.

The clawback also creates a financial incentive for states to restrict Medicaid coverage to low-income senior citizens and people with disabilities in order to both reduce Medicaid costs but to also reduce the clawback payment to the federal government, as the clawback includes the number of enrolled duals in the formula.

Governors should enlist the support of a few of their colleagues that voted for the legislation that imposed the clawback, including Governors Nathan Deal (Georgia), Sam Brownback (Kansas), Butch Otter (Idaho), and Mitch Daniels (Indiana). Ironically, these governors all contributed to their own current financial crisis that they are now complaining about.

The purpose of Medicare, Medicaid, and CHIP is to help provide millions of Americans access to much needed, live saving health insurance coverage. Rather than eliminating a MOE provision in the health reform bill that protects and retains health coverage for millions of Americans, the more appropriate MOE to repeal is the one included in the Medicare prescription drug bill that serves no purpose whatsoever other than to unilaterally force states to pay the federal government billions of dollars to pay for what is entirely a federal program.

Originally featured today on The Hill’s Congress Blog.