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States seek more federal funds as Medicaid enrollment grows

Record unemployment levels have shifted individuals from employer-sponsored or other insurance coverage

The number of Americans on Medicaid continues to rise as people lose their insurance during the economic downturn, but policy experts disagree on how much additional funding states facing higher costs may need. 

National enrollment in Medicaid and the Children’s Health Insurance Program jumped by 4 million between February and June, an increase of almost 6 percent, according to Centers for Medicare and Medicaid Services data released recently.

Record unemployment levels have shifted individuals from employer-sponsored or other coverage to Medicaid, the nation’s program for low-income individuals. 

States that accepted a boost in federal funds earlier this year in the first COVID-19 relief package are forbidden from disenrolling individuals from Medicaid during the public health emergency, which Health and Human Services Secretary Alex Azar recently renewed for 90 days starting Oct. 23. 

While this ensures that more individuals have medical coverage during a pandemic that has claimed the lives of more than 210,000 Americans, it also further strains states that have struggled this year.

Aviva Aron-Dine, vice president of health policy at the Center on Budget Policy Priorities, said there likely will not be a big impact on state budgets in the long term because the economy and enrollment will eventually return to normal levels.

“But in the near term, I think the impacts are very significant. Medicaid is a big part of state budgets, and so as more people enrolled, that’s putting pressure on state budgets,” she said. “They’re looking at every aspect of their budget and worrying about where they’re going to need to cut.”

States’ funding push

Congress is currently stalled on new COVID-19 relief, but any future stimulus deals eventually could include state funding for Medicaid.

The House recently passed a revised version of its COVID-19 package, which would increase the Federal Medical Assistance Percentage payments to state Medicaid programs by a total of 14 percentage points starting Oct. 1, 2020, through Sept. 30, 2021. Senate Republicans are unlikely to support this. 

Jack Rollins, director of federal policy for the National Association of Medicaid Directors, said several states are seeing steady increases that are several percentage points above previous years’ enrollment trends. 

“The issue of growing enrollment in the Medicaid program is top of mind for our members, and has been since the onset of the pandemic,” he said, adding that it is difficult to pin down how much the enrollment increases are caused by economic conditions in the states or due to the continuous enrollment requirement in the first COVID-19 law.

“We understand and agree with congressional intent to ensure no one loses health insurance coverage during the pandemic, though we have asked for targeted modifications to address certain scenarios where individuals may have non-Medicaid coverage options available as their circumstances change,” he said.

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States like New York, Nevada and Utah saw some of the highest increases in Medicaid and children’s health program enrollment this year, according to CMS. Most, but not all, are lobbying for more federal aid.

Freeman Klopott, press officer for the New York State Division of the Budget, says the state is concerned about funding for a variety of programs that are at risk to offset the state’s $62 billion, four-year revenue loss. 

“For six months, we’ve been calling on the federal government to take action, including raising the enhanced FMAP reimbursement rate to 14 percent and keeping it in place until the national unemployment rate falls below 5 percent. Washington continues to promise federal aid is forthcoming; we believe them, and we are managing the state’s finances to keep the budget in balance as we await clarity on federal action,” Klopott said.

Shannon Litz, a Nevada Department of Health and Human Services public information officer, said the state faced a budgetary crisis as the economic faltered. 

“Nevada’s Medicaid enrollment has increased by 14 percent since February 2020, and the state continues to closely monitor changes,” said Litz.

She added that the Nevada Legislature held a special session in July to address a $1.2 billion budget shortfall, including reductions to the state’s Medicaid budget for the current fiscal year.  

Michigan is also seeking more money. The state recently reported that more than 800,000 people there receive Medicaid, up 118,000 since the onset of the pandemic in March.

“Fortunately, the additional federal aid we’ve received has allowed us to avoid cuts like reduced provider payment rates and slashed benefits,” said Bob Wheaton, a Michigan Department of Health and Human Services public information officer, adding that more funding “is critical to ensure we are able to maintain health care services for all those in need.”

But Kolbi Young, public information officer for the Utah Division of Medicaid and Health Financing, said the enrollment increase is to be expected.

“While Utah is experiencing growth in this program, we have still not reached the projected expansion enrollment,” said Young. “With the additional federal funding and budgeted adult expansion growth, we do not have funding concerns at this time.”

Next steps

Experts don’t agree on what Washington officials should do next.

Stacey Mazer, senior staff associate with the National Association of State Budget Officers, said as the organization monitors how states are handling their budgets, one commonly raised question is how long the public health emergency will last.

The increased federal funding for states is tied to the public health emergency, which Mazer called a “huge budget uncertainty.” States will stop receiving the enhanced amount at the end of the quarter in which the emergency ends, and the continuous eligibility requirement for Medicaid enrollees would stop at the end of the month of the emergency.

“That’s something that you know we can’t really necessarily anticipate,” she said.

Former HHS acting general counsel Tom Barker issued a warning about the health emergency.

“HHS should not just end the public health emergency prematurely, or without significant sufficient notice to states, because otherwise states are really going to be in a difficult situation, and I think HHS knows that that’s going to be an important consideration,” he said.

He cautioned that when the immediate health threat does end, it doesn’t necessarily mean the need for more Medicaid funds will end because some lost jobs will not return immediately. Restaurant workers may no longer be able to work at a business that closed and air travel likely won’t return to normal for years.

“There’s also the question, of course, of whether or not the FMAP increase was sufficient for the increase in enrollment, and I think that’s going to have to be a policy decision for Congress to make because HHS can’t really do anything about that,” said Barker.

But Joseph Antos, the Wilson H. Taylor resident scholar in health care and retirement policy at the American Enterprise Institute, said something else to consider is decreased utilization of medical care during the pandemic.

“The people who have lost their jobs are, by and large, healthy, so they’re not a great strain on the health system. There’s certainly not a great strain on the Medicaid program,” he said, noting this population mainly goes for routine office visits.

He added that if the matching rate before the pandemic was adequate for states, it should be sufficient now because hospital spending dropped.

Robin Rudowitz, co-director for the Program on Medicaid and the Uninsured at the nonpartisan Kaiser Family Foundation, expects to see increases in both spending and enrollment going into 2021.

“Even when the official recession or economic downturn ends, you know, there’s typically more of a tail on the Medicaid side,” Rudowitz said.

States in an economic bind may face tough choices, such as turning to rainy day funds, making budget cuts, cutting provider rates or implementing layoffs. Those may be difficult, given that some doctors and other providers are already struggling this year. 

“Some of those things are harder now than they would have been in another more typical economic downturn,” she said.

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