States Want OK to Cut Medicaid—Without Penalty Governors battle Washington over measure in health reform law By Matt Cantor, Newser User Posted Feb 28, 2011 9:46 AM CST 38 comments Comments U.S. Health and Human Services Secretary Kathleen Sebelius speaks at a health care round table discussion, Wednesday, Feb. 9, 2011, in Seattle. (AP Photo) (Newser) – America's 29 states led by Republican governors are asking Washington to give them the green light to cut thousands from Medicaid—without being penalized. The health care reform law says that states that reduce eligibility for the program will lose federal funding, and these cash-strapped states (along with, quietly, some Democrat-helmed ones) want the federal government to waive the rule. The feds currently cover an average of 57% of states' Medicaid bills, though states' shares are set to get larger in July, when $26 billion in additional federal Medicaid funding will expire, the Wall Street Journal reports. "All we are asking for is latitude in how we work our own system," said Maine’s governor. But the administration may not have “the legal authority” to allow a waiver of the eligibility rule, says an official, which means it may be up to Congress. In the meantime, Kathleen Sebelius called on states to seek other ways of shrinking Medicaid deficits, like raising copayments. But states say the real expenses come from things like long-term care; Medicaid covers almost two-thirds of all nursing-home residents.