I’ve been banging the drum about the possibility of Medicaid cuts as a grand bargain safety valve. It appears the Republicans are thinking the same way.

While Democrats keep hammering Republicans over a House budget that would turn Medicare into a voucher program, Republicans have been trying to shift the focus back to Medicaid.

Hatch and House Energy and Commerce Chairman Fred Upton, R-Mich., sent a letter to the governors Monday soliciting “ideas on how to make Medicaid work better.” Earlier this month, Hatch introduced a bill that would repeal a provision in the health reform law that says states can receive more Medicaid funding if they agree not to reduce eligibility requirements below their February 2009 levels.

The Energy and Commerce Health Subcommittee approved similar legislation on a party line. “I think most governors are with us on this, because they can’t live with what’s been done. Right now, mostly Republican governors are responding, and the Democrats are a little bit afraid, I think,” Hatch said Tuesday.

Democratic governors have not been as vocal as Republicans in supporting a repeal of the law’s eligibility rules. In January, Gov. Christine Gregoire, D-Wash., in her role as National Governors Association Chair, sent a letter asking Congress to ease the financial strain on states by undoing a slew of federal requirements, including the Medicaid piece.

There are just a lot of pitfalls for Medicaid. One, the states see it as a drain on their already strapped budgets. Two, Congress wouldn’t have to be the executioner – they’d just put it in the hands of the states to let them do the cutting. Three, it doesn’t have the same cache of Medicare, though hopefully that is changing – support in this Kaiser Poll for Medicaid is pretty high.

The good news is that the Administration, through NEC Director Gene Sperling, just rejected the Ryan Medicaid block grant plan. I think this is a pretty big deal.

Mr. Sperling attacked the House Republican proposals to overhaul Medicare and Medicaid, saying that the $770 billion in savings Republicans wanted from changing Medicaid would be unneccessary if Republicans would agree to roll back certain tax cuts.

“You can’t say to anybody who would be affected by that, that we have to do that, that we have no choice,” he said. “The fact is that all of those savings would be unnecessary if you were not funding the high income tax cuts.”

He also said that Mr. Ryan was wrong when he said that raising taxes as part of a broader package would hurt economic growth.

“Everything he said I heard nine million times in 1993,” said Mr. Sperling, who was NEC deputy director in the Clinton administration and later became Mr. Clinton’s national economic adviser.

Sperling apparently also said “From a values perspective, we should be very deeply troubled by the Medicaid cuts in the House Republican plan.”

This is excellent. If the White House fights for Medicaid rather than wanting to gain “credibility” through a deal, it cuts off that avenue of escape for Republicans. Safety-net programs could then get untouched and deferred until after the 2012 elections. This would be the best-case scenario at this point.

I wonder if the fact that Medicaid expansion, rather than cuts, represents half of the coverage gains under the Affordable Care Act. In fact the Obama health care law cannot work without expanded Medicaid covering more people at a cheaper rate (Medicaid rates are extremely low). So block-granting the program would utterly destroy that, and make the health care law even more unpalatable to the public.

We’re seeing the advocacy groups pitch in on this. The alert from Health Care for America Now to tell Senators to vote against the Ryan budget (up for a vote this week in the Senate) pointedly included Medicaid. And Protect Your Care, a new pro-health care group, sent around the Medicaid poll numbers. If Medicaid’s strengths, and importance to both the poor and to seniors, are announced for the world to see, it puts cuts in a more difficult position.

Sperling was speaking at a Peterson-funded “Fiscal Summit.” Six think tanks were bribed into producing deficit plans for this summit, which you can peruse. But with Medicare a huge liability and Sperling taking Medicaid off the table, these plans have lost their luster a bit.

That said, I don’t know what’s left to get a deal on the debt limit done, given all this.

UPDATE: I got passed the full transcript of Sperling’s remarks. They’re really powerful:

And I say this to everybody in this room, there is enormous discussion about the revenue side and the Medicare side. But from a policy perspective, from a values perspective, we should be very deeply troubled by the Medicaid cuts in the House Republican plan. I want to make clear what they are. This is not my numbers, this is theirs.

After they completely repeal the Affordable Care act, which would take away coverage for 34 million Americans, according to the Congressional Budget Office. After they’ve completely repealed that, they do a block grant that would cut Medicaid by $770 billion. In 2021, that would cut the program by 35 percent. Under their own numbers, by 2030, it would cut projected spending in Medicaid by half. By 49 percent. So, of course– I don’t think– or imply any negative intentions or– lack of compassion. But there is a tyranny of the numbers that we have to face.

And here’s the tyranny of the numbers. Sixty-four percent of Medicaid spending goes to older people in nursing homes or families who have someone with serious disabilities. Another 22 percent goes to 35 million very poor children. Now I ask you, how could you possibly cut 35 percent of that budget and not hurt hundreds of thousands, if not millions of families who are dealing with a parent or a grandparent in a nursing home, or a child with serious disabilities. How is the math possible.

If you tried to protect them mathematically, you would have to eliminate coverage for all 34 million children. Now I know some people didn’t like when– the President mentioned that this was going to be very negative for families, for those amazingly brave parents. And he may be one of them in our country, who have a child with autism or Down’s and who just are enormously committed and dedicated to doing everything they can to give their child the same chance– every other child has.

But here’s the reality. Medicaid does help so many families in those situations. Over the years, we’ve allowed more middle class families who have a child with autism to get help in Medicaid. There’s a medical needy program that says when you spend down– we’ll– we’ll count the income after you’ve spent down medical costs.

There’s a Katie Beckett (PH) program that was passed by President Reagan that says if you have a child that’s in need of institutional care– you can get help from Medicaid. This is– this is a life support for many of these families. But these are the optional programs in Medicaid. These are the ones that go to more middle class families. If you’re going to cut 49 percent of projected Medicaid spending by 2030, do you really think these programs will not be seriously hurt.

So when we say that there– that the tyranny of the math is that these– these– this Medicaid– program, this Medicaid cut will lead to millions of poor children, children with serious disabilities, children with autism– elderly Americans in nursing homes losing their coverage or being– or– or having it significantly cut, we are not criticizing their plan. We are just simply explaining their plan.