Medicaid Extension Likely to Pass US Senate, Averting Huge State Deficits

Worst case scenarios abound if Congress fails to extend for another six months the enhanced Medicaid match begun by the 2009 stimulus. CSG’s recent survey found that over half the states have already counted on the extension, from January 1 until June 30, 2011, in their budget deliberations for FY 2011.

The Center on Budget and Policy Priorities released a report yesterday estimating that 900,000 public and private sector jobs would be lost without the extension. The NY Times quoted Pennsylvania’s Gov. Rendell saying 20,000 public sector jobs – teachers, police and others – would have to be eliminated. That is because the deficit in states’ Medicaid programs cannot be made up solely through budget cuts in that program – the deficit will ripple out to other state programs and services. And many states will start to make those cuts on July 1, 2010 to spread the savings over 12 months rather than making deeper cuts half way into their fiscal years.

The Senate appears poised to put the extension back in the so-called “tax extender” bill next week, after the U.S. House took out the Medicaid match extension under pressure from conservative members concerned about political fallout over growth of the federal deficit. Senator Schumer (D-NY) said yesterday that he has the 60 votes needed to add the Medicaid extension and pass the bill. Governors and others are lobbying the Senate to include the Medicaid relief, warnings their state delegations about deep cuts to education, health and public safety that will be necessary otherwise.