The commission, which is supported by lawmakers, would consider ways to slow Medicaid cost growth.
It comes as a New York Times article revealed proposals by the National Governor's Association and the National Conference for State Legislatures that would require some beneficiaries to pay more for care and give states more rights to limit services.
The article also reported the governors endorsed the idea of tax credits, which would help individuals and small businesses buy insurance, with the goal of reducing the number of uninsured people who end up accessing the Medicaid program.
State Legislatures also proposed the idea of giving states a fixed amount of federal money for long-term care, the most costly aspect of Medicaid -- which many governors feel is the job of the Medicare program.
The states have agreed with President Bush's plan to tighten restrictions on how the elderly dump or hide assets to ensure that they are poor enough on paper to have the Medicaid program pay for their long-term nursing home care.
During the budget process, U.S. lawmakers agreed to reduce Medicaid spending by $10 billion, and the new commission would work on ways to do that.
Medicaid was started to help low-income families but also offers coverage to pregnant women, persons with disabilities and seniors in nursing homes. Medicaid accounted for 21.4 percent of total spending of states' budgets in 2003, the National Association of State Budget Officers reported, surpassing primary and secondary education spending.
The projected budget for Medicaid in 2006 is $338 billion, with $193 billion being paid by the federal government.
The NGA's proposal, marked "for comment only - not for distribution," was circulated among members of the media and congressional offices. The NGA said most of the points made by the Times article are correct but the proposal still is undergoing revision and could be ready in two weeks.
The proposed draft is not the official policy of the NGA until the executive committee or the full body of governors reaches a supermajority vote, the NGA said in a statement. The goal of the draft proposal is to create a bipartisan plan for Congress to consider independent of the federal budget and reconciliation process.
A letter circulated with the 12-page proposal from the NGA stated, "Medicaid reform must be driven by good policy and not the federal budget process."
Ron Pollack, executive director of Families USA, a national advocacy group, said congressional cutbacks were troublesome because numbers were driving policy-making decisions.
"We should decide what we want the role of Medicaid to be in the future rather than establishing arbitrary (cost) reductions in the program," Pollack said. "What Congress did was put the cart before the horse."
Pollack issued a statement Thursday that called the commission a sham. "The need for a bipartisan and thoughtful process to consider the long-term role of Medicaid is very obvious. The Medicaid Commission created by the Bush Administration, however, is more likely to be a sham that will only rubber-stamp predetermined conclusions designed to cut back vital health services for America's elderly, children, and other vulnerable groups," he said.
HHS Secretary Michael Leavitt has supported, along with the governors, the idea states need more flexibility in providing benefits for populations that are not required under federal law to be covered by Medicaid. Most states stretch their coverage to include many low-income workers and families that would not normally qualify for the program but who cannot afford health insurance.
Leavitt and the governors also agree Medicaid prescription drug payments should be studied to see if better prices can be negotiated.
The current position of the NGA is that Medicaid is costing states too much money, making it difficult to fund other programs like education, law enforcement and transportation.
Charles Milligan, executive director for the Center of Health Programs at the University of Maryland, said the biggest challenge facing Medicaid is enrollment growth.
"I think it is a very unique moment in history," Milligan said, "because there is a consensus growing between state and federal governments and Democrats and Republicans that flexibility is required. Treating the Medicaid program as distinct subgroups is required given the size the program has grown to."