More * Lies: Medicare, The Feds & the States

March 25, 2005
Cost-Cutting Medicare Law Is a Money Loser for States
By ROBERT PEAR

ASHINGTON, March 24 - In passing the new Medicare law, Congress intended to relieve states of prescription drug costs for low-income elderly people. But as states do the arithmetic, many find that they will lose money, because they will have to give back most of the savings to the federal government.

The law opened a new chapter in federal-state relations, requiring the states to pay billions of dollars a year to the federal government for a Medicare benefit over which they have no control.

"This is a sea change in the state-federal relationship," said Trudi L. Matthews, chief health policy analyst at the Council of State Governments, a nonpartisan group that has been tracking trends in federalism for 70 years. "Money generally flows down from Washington to the states, but in this case it's flowing upward, from the states to the federal government."