Indiana health care consultant Seema Verma was approved by the Finance Committee on a 13-12 party-line vote.
Verma would head the Centers for Medicare & Medicaid Services, an agency that oversees health insurance programs covering more than 130 million Americans. Known as CMS, it's also responsible for administering the Obama-era health care law that Trump has vowed to repeal and replace.
Her consulting business has about a dozen staffers, and if confirmed, she would run an agency with nearly 6,500 employees.
A significant number of Republican governors expanded Medicaid coverage for low-income people under the Affordable Care Act. Now, they are considered pivotal players in the congressional debate to decide the fate of "Obamacare."
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Some of the governors are concerned that a plan from House Republicans to limit future federal financing would take too much money out of Medicaid, too quickly.
Verma said during her confirmation hearing that Medicaid needs a full overhaul but that she doesn't support turning Medicare into a "voucher" plan.