States Count on Medicaid Match Extension

e-Newsletter, Issue #51, July 22, 2010

Michigan Gov. Jennifer Granholm is still counting on the extension of increased funding for federal Medicaid match, known as FMAP, for an additional six months through June 2011.

The extension is included in Granholm’s proposed budget for the upcoming fiscal year, which begins Oct. 1, even though Congress failed to pass the extension. Granholm has good reason to hope for the extension: Her state faces a $560 million shortfall if the extension is not approved.

“We continue to be hopeful that Congress will appropriate the FMAP funds because that was the signal we had been getting all along,” Liz Boyd, Granholm’s press secretary, told CSG. “Failure to receive these funds would be catastrophic to our state.”

Michigan isn’t alone in hoping for—and counting on—the extension.  It remains in the budgets of 25 states, a Council of State Governments’ review of adopted state budgets shows. 

Enhanced FMAP funds began in the 2009 Recovery Act as a way to help states avoid huge cuts in their state health care programs. Many states are counting on the extension of this funding to avoid budget cuts and to maintain a balanced budget.  Overwhelming budget shortfalls are expected to hit every state counting on the extension should Congress fail to extend the funding, according to the CSG report.

“While the issue pending in Congress is a funding increase for the Medicaid health program, the impact in states ripples through the entire state budget,” said Debra Miller, CSG director of Health Policy. “Because of federal rules, states have limited ability to make cuts in Medicaid. Therefore, cuts end up coming from budget areas where states have more flexibility, often education and public safety.”

The overall budgetary impact had a bipartisan group of governors pushing for the extension in Washington, D.C., before the Senate vote at the end of June.  Pennsylvania Gov. Ed Rendell, who led the effort, said the loss of FMAP funding would result in serious cutbacks in education and social services and also result in thousands of layoffs in those sectors, according to PR Newswire. 

Those added economic woes create an even bigger need for the FMAP extension, state officials say.

“Because states have the additional burden of people that have slipped into the range of needing Medicaid assistance, the federal government is responsible for helping the states handle these costs,” Rendell’s press secretary, Gary Tuma, told CSG.

Congress’ failure to approve the funding adds to the burden states are facing as they try to rebound from the recession.

“Budget cuts that will result from the failure to receive FMAP funding will result in additional layoffs to numerous jobs within the states, the wrong prescription for bringing the national economy out of recession,” Tuma said.

Republican governors are also calling for extension of FMAP funding.  Arizona Gov. Jan Brewer recently sent a letter to U.S. Sen. John McCain calling the funding “an essential tool to assist states,” according to the The Wall Street Journal.

Some governors, including Deval Patrick of Massachusetts and Mark Sanford of South Carolina, vetoed legislation to include the extension in the budget because they believed Congress would not approve the extension. Legislators in both states did not override the vetoes, and passed budgets without the extension.  

Legislatures that included the enhanced Medicaid match in their 2011 fiscal year budget have done so because of massive cuts that would have to be made otherwise, according to the CSG report.

In fact, even though Congress failed to pass the extension recently, it remains in the budgets of California and Michigan, two states where the legislature has yet to act on the budget.


CSG Resources

Other Resources

Forbes, PR Newswire, "Governor Rendell Joins Bipartisan Group of Governors to Urge Congress to Extend Federal Medicaid Assistance to States"