For cash-strapped state governments, the “clawback” is the most controversial and costly provisions of the Medicare Modernization Act (MMA) and the new Medicare prescription drug benefit.

Now, as state begin new fiscal years and grapple with the latest Medicaid spending projections, some state leaders are balking at paying the federal treasury $124 billion over the next ten years to cover the drug costs of a federal benefit. Most state fiscal gurus also predict MMA will impose other costs on state taxpayers. California, for example, projects that Medicare Part D will cost the state $215 million more next year. And many legal experts believe the clawback is simply unconstitutional.

The feds maintain that MMA will save states money but to achieve any savings states must drop drug coverage for their retirees – this is only possible for states that make direct contributions to fund Rx coverage and if the state decides to renege on union contracts. This scenario is not available or practical for many, perhaps most, states.

Is Medicare facing a modern-day version of the Boston Tea Party? Leaders in Texas and New Hampshire reportedly intend to not pay the clawback. And the National Governors’ Association’s national Medicaid reform proposal calls on Congress to modify MMA, saying that “The clawback provisions should not be a further financial burden on states…

The fireworks have just begun.