Odds Shifting on Medicaid Match Extension

E-newsletter Issue #48 | June 10, 2010

Federal funding to further prop up states’ Medicaid budgets—and by extension overall state budgets—seemed like a sure bet just weeks ago. Now the odds on that bet appear to be shifting away from states’ favor, and some predict without the federal funding, nearly 1 million jobs could be lost to state budget-cutting actions as a result.

More than half the states counted on Congress adding another six months to Medicaid match rates increased by the 2009 stimulus as they built their 2011 fiscal year state budgets, according to a recent Council of State Governments survey.

But last week the U.S. House deleted the $24 billion provision from a tax and jobs bill that has moved on for consideration by the Senate. Conservative House members successfully pressed their case that deficit spending must be reined in.

This week, however, New York Sen. Chuck Schumer offered a glimmer of hope that the Senate would add the Medicaid match extension back in and pass the bill next week.

“We fully expect to have the 60 votes to be able to pass this bill by early next week,” he said at the June 8 press conference.

Still, without that $24 billion extension, state budget-closing actions could cost the national economy 900,000 jobs, the Center on Budget and Policy Priorities concluded in a report released June 8. Those lost public and private sector jobs would be a result of layoffs of teachers and other public employees, cuts to other public services and a reduction in health care services and payments under Medicaid.

“If Congress does not extend this funding, most states will be forced to cut public services even more deeply than they have already. That will cost large numbers of jobs inside and outside the public sector and threaten to reverse the start of the economic recovery we currently see,” Michael Leachman, an author of the report, told CSG.

Pennsylvania Gov. Ed Rendell agreed that the budget problems will not be confined just to Medicaid. He told The New York Times that the loss of $850 million to Pennsylvania’s Medicaid program will force the layoff of at least 20,000 government workers—including teachers and police officers—because the entitlement nature of Medicaid mitigates against slashing that program.

“It would actually kill everything the stimulus has done,” Rendell told the Times.

To illustrate the impact of the bump in the Medicaid match rate, Neville Wise, Kentucky’s deputy commissioner of Medicaid Services, recently told a group that the standard match rate takes one Kentucky dollar, adds $2.44 in federal funding to buy $3.44 in health benefits. Under the stimulus enhanced match, that one Kentucky dollar brings in $4.13 in federal funding.

In Kentucky, a medium-sized state, the loss of the enhanced match for the second half of the 2011 fiscal year creates a deficit of $1 billion in its approved budget. A deficit of that size will force cuts across the entire state budget.

Governors have stepped up their lobbying efforts. Kentucky Gov. Steve Beshear spoke with Senate Minority Leader Mitch McConnell, Kentucky’s senior senator, who reiterated his concern about adding to the country’s “growing and unsustainable debt,” according to the Louisville Courier-Journal.

Individual governors’ actions follow a February National Governors Association letter signed by 42 governors—26 Democrats and 16 Republicans—urging Congressional approval. Last week, Maryland Rep. C.A. Dutch Ruppersberger told the Huffington Post, “We need to hear from both Democratic and Republican governors that they need this.”

Other groups have joined the advocacy effort. Five pharmacy associations—the American Pharmacists Association, the Food Marketing Institute, the National Association of Chain Drug Stores, the National Alliance of State Pharmacy Associations and the National Community Pharmacists Association—sent a letter to Congressional leaders June 8 calling for passage of the six-month extension.

“Cuts in state Medicaid programs, potentially resulting in diminished access to medications and pharmacy services, could harm patients’ health and increase long-term costs, particularly those related to untreated chronic health conditions,” they said in the letter.

States’ hopes are buoyed by comments from Nevada Sen. Harry Reid.

“We intend to add to that (jobs) bill FMAP funding—that’s Medicaid money to ensure the poorest in our communities can afford to stay healthy—which will protect jobs in states like Nevada and prevent deep cuts to critical services,” he said in a floor statement June 7.

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