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Medicaid enrollment increase puts pressure on state budgets

More people are eligible during the economic downturn

A sign marks the entrance to the emergency room at the George Washington University Hospital in Washington on Monday, March 23, 2020.
A sign marks the entrance to the emergency room at the George Washington University Hospital in Washington on Monday, March 23, 2020. (Bill Clark/CQ Roll Call file photo)

Medicaid experts and public health officials are pushing Congress to increase federal funding for the program for low-income people, as the COVID-19 pandemic pushes more individuals into government-sponsored coverage.

Total Medicaid enrollment was up 5.8 percent over the past three months, data on 15 states by the Georgetown University Center on Children and Families found in June. In Florida, the increase was almost 10 percent.

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Earlier this year, Congress authorized a 6.2 percent increase in federal Medicaid matching rates for states in the second COVID-19 law (PL 116-127) during the national emergency, but public health officials worry this is not enough.

“As the pandemic continues to unfold and as we see economic conditions kind of deteriorate across the nation and start hitting states’ general revenues and tax sources, the budget challenges that state governments across the board are facing are pretty significant and are really increasing going into the future,” said Jack Rollins, program director for federal policy for the National Association of Medicaid Directors.

Medicaid is typically one of the most expensive line items in a state’s budget, and another increase in the federal matching rate — known as the Federal Medical Assistance Percentage or FMAP — would help defray costs.

“As state revenues decrease, Medicaid is going to be kind of front and center for conversations around how the state is wanting to address budget gaps and shortfalls,” said Rollins.

States and their advocates like NAMD and the National Governors Association would like to see more federal funding to account for these shortfalls.

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Both groups want Congress to boost the federal matching rate for Medicaid from a 6.2 percent bump to 12 percent to compensate for increases in Medicaid enrollment.

“The National Governors Association and our members continue to have conversations with federal leaders and members of Congress on these requests, as well as our broader request for fiscal stabilization funding for states and territories,” said James Nash, a press secretary for NGA.

The House passed a COVID-19 relief bill (HR 6800) in May that would increase the FMAP bump for states to 14 percent from July 1, 2020 to June 30, 2021, then drop it back to the 6.2 percent bump until the end of the public health emergency.

The Democratic-backed bill is unlikely to be taken up by Senate Republicans who are working on their own proposal for the next COVID-19 package.

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Stacey Mazer, senior staff associate with the National Association of State Budget Officers, said she’s seen a lot of changes as states closed out their fiscal years. Most states’ fiscal years ended June 30. 

“You’re seeing a situation right now with very dramatic numbers in terms of revenue shortfalls, revenues coming in below expectation due to what’s happening in the economy and the impact of the coronavirus,” said Mazer. “We’re seeing a really sort of dramatic change in state budgets as they are trying to close out this year coming into next year. A lot of it is the uncertainty of what the numbers really look like.”

Contingency plans

As states face fiscal uncertainty, officials are considering how to take action to balance their budgets. 

Some have already made budget cuts while others are instructing agencies to modify their 2021 budgets. States with two-year budgets may have to make adjustments.

“The assessment is if there is going to be additional federal aid, what would it look like, [and] would it help with revenues,” said Mazer. “Some of the states are almost putting contingency plans out there and saying, ‘Look, based on what we’re seeing with revenues right now and the severity of it, we’re going to have to take action.’”

She said this could result in budget cuts or potential layoffs.

“At some point, there’s going to have to be plans to make it work and keep your balanced budget that you are required to do,” she said. “There are all sorts of actions that are being discussed because of the fact that you don’t have the revenues to continue your spending.”

Minnesota is one of the states reviewing its options if more money isn’t provided.

“We are reviewing ways we can continue to serve vulnerable populations while at the same time slowing the growth of health care spending,” a Minnesota Department of Human Services spokeswoman told CQ Roll Call. “This includes looking at delivery systems that incentivize providers and plans to focus on outcomes rather than on delivering more services. Given the state’s expected budget shortfalls, simply absorbing the costs of this rapid enrollment growth is not feasible.”

States that receive the enhanced match that Congress already provided are required to maintain coverage and services for enrollees, which is called maintenance of effort.

Rollins said what is unique about the maintenance of efforts tied to the current FMAP increase is that individuals who might otherwise cycle in and out of Medicaid on a monthly basis as their income and eligibility fluctuates are guaranteed coverage throughout the emergency.

This, he says, has resulted in the FMAP increase not going as far as it could.

“Based on the 2008 recession and previous recessions, Medicaid programs generally have only a few options for managing costs in a targeted way. And that’s why we’d like to see additional support from the federal government in the form of an increased FMAP that would mitigate the need for states to make some very difficult decisions in their Medicaid programs, whether that’s limiting coverage, reducing benefits or reducing provider rates,” said Rollins.

In the past when state budgets were tight, states often cut payments to doctors and other Medicaid providers or reduced optional benefits that states are not required to offer. 

During the Great Recession more than a decade ago, Congress enacted a law (PL 111-5) providing increasing states’ FMAPs by at least 6.2 percent, with additional funds for states with large increases in unemployment. That FMAP increase was in effect for a 27-month period.

State actions

Many states are actively lobbying their congressional delegations. 

The Minnesota Department of Human Services said the state is advocating for an increase in the FMAP. 

“We project that, as a result of the pandemic and its impact on our economy, an additional 107,850 Minnesotans will need public health care coverage over the next 12 months. That is an increase of about 10 percent compared to pre-COVID-19 forecasts made in February,” the spokeswoman told CQ Roll Call.

States like Arizona and New Hampshire said they are coordinating their advocacy efforts through NAMD in asking for an extension and increase in enhanced FMAP.

Kevin Walter, an Ohio Department of Medicaid spokesman, said the state also asked for the FMAP increase to be extended beyond the health emergency.

“Ohio Medicaid has been able to meet budget cuts necessitated by the pandemic without reducing benefits and coverage of some of Ohio’s most vulnerable residents,” he said.

Ohio last month announced government employee pay cuts and a hiring freeze to help cover its budget. Ohio GOP Gov. Mike DeWine also issued an executive order to cut $300 million from schools.

Other states took similar actions, according to a document NASBO compiled.

Wisconsin Democratic Gov. Tony Evers issued an executive order reducing agency budgets by 5 percent this fiscal year to save about $70 million.  Governors in Nevada and Tennessee also proposed budget cuts in June to cover shortfalls.

Elliott Sprehe, a spokesman for the Texas Health and Human Services Commission, said the state appreciated the higher FMAP made available so far in response to the pandemic.

“As stewards of public funds entrusted to us to provide care to Texans enrolled in the Medicaid program, we are always focused on ensuring that Medicaid in Texas is efficient,” he said, “while also supporting access to care for Medicaid beneficiaries.”

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