‘When They Need Assistance Most’: Senate Bill Aims To Extend Medicaid Help To Struggling States

Senate Majority Leader Harry Reid (D-Nev.) and Sen. Jay Rockefeller (D-W.Va.) say they intend this week to introduce legislation that would extend by six months the extra financial help states are receiving to help cover the costs of their Medicaid programs.

The legislation would extend by six months the increase in the Federal Medical Assistance Percentage (FMAP) that states currently receive from the 2009 economic stimulus bill. The American Recovery and Reinvestment Act provided fiscal relief to state and local governments in the form of a 6.2 percentage point increase in FMAP funding as well as additional assistance for states with high unemployment.

This increase in federal reimbursement will comes to a halt on Dec. 31, which occurs in the middle of fiscal year 2011 for most states. An extension beyond that date is increasingly necessary as states are projected to face continued severe budgetary shortfalls due to the economic downturn and resulting sharp decline in tax revenues, supporters of an extension say.

“We absolutely need this six months of relief while we weather this economic storm – too many families depend on this program for us to allow a shortfall of funding,” says Rockefeller, chairman of the Senate Finance Committee health care subcommittee. “Medicaid is a significant economic generator in West Virginia, paying almost 20 percent of the total cost of West Virginia’s health care system and supporting an estimated 19,800 jobs in the state while providing essential health care coverage for the 390,000 West Virginians who currently rely on Medicaid each year.”

The announcement by Reid and Rockefeller comes just weeks after nearly 40 Democratic senators urged Reid to introduce such an extension.

“While we had all hoped that state fiscal relief would only be necessary for 27 months, the reality is that this economic downturn persists and many states are still facing severe budget shortfalls,” those senators say in their letter to Reid. “In fact, several states are just now beginning to experience the worst part of this recession.”

The budget shortfall in Arizona, for instance, may well result in the cancellation of health coverage for 310,000 low-income childless adults and 47,000 low-income children, elimination of cash assistance for 10,000 poor families, and elimination of the Department of Juvenile Corrections, according to the Center on Budget and Policy Priorities (CBPP), a Washington think tank.

At least eight governors’ budget proposals assume that Congress will extend the increased federal funding for Medicaid enacted in last year’s Recovery Act, the CBPP says in a recent report. If Congress doesn’t extend it, those states likely will make deeper and broader cuts than their governors are now proposing, the think tank adds.

“It will be harder than ever this year for states to balance their budgets without inflicting serious harm on vulnerable residents and the state economy,” says Nicholas Johnson, the center’s director of state fiscal policy and co-author of the report. “States will need to take a balanced approach that includes revenues, because these shortfalls are too big to close with cuts alone.”

Without further federal aid, the actions states will have to take to close their budget gaps could cost the economy 900,000 jobs, CBPP says.

“One of the most effective ways Congress can boost the economy and protect jobs is by making sure that Recovery Act assistance for states’ doesn’t dry up halfway through the coming year, which would force states into even bigger budget cuts that could stall the fragile economic recovery,” Johnson says.

In their letter to Reid pushing action on Medicaid funding, the senators note that the House already has passed the Jobs for Main Street Act of 2010 (H.R. 2847), which included an extension of the enhanced FMAP rate through June 2011. This six-month extension was also included in Section 1749 of the House-passed health reform bill (H.R. 3962).

“Without these funds, states will have to cut critical services and raise taxes even more than otherwise would be the case, further undermining economic growth,” their letter says. “Additional FMAP funding will help states continue to serve vulnerable populations through Medicaid, at a time when they need assistance the most, avoid making harmful reductions in vital benefits and services, provide additional protection against deep job losses, and protect the sustainability of Medicaid at the very moment we are trying to expand the program.”

Eligibility for Medicaid coverage would be expanded under healthcare reform legislation now stalled in Congress.

The publisher of the news site On The Hill, Scott Nance has covered Congress and government for more than a decade.

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