States face less federal Medicaid money, more demand

The Wall Street Journal reports that state legislatures are grappling "with deficits totalling $127 billion over the next two fiscal years, according to the National Association of State Budget Officers. ... Of immediate concern to states is the hit they will take if Congress doesn't approve an additional $24 billion to help defray the cost of Medicaid, the federal-state insurance program for the poor. Cost concerns prompted the House to jettison the Medicaid funding this month, and the Senate also is considering stripping out the provision."

But thirty states have already "budgeted for the Medicaid funds, which would provide additional money for six months beginning Jan. 1. Of those states, only nine have contingency plans in place if the money doesn't arrive, according to the National Conference of State Legislatures. … Federal matching Medicaid funds are set to expire Dec. 31, 2010, just as states are seeing a growing number of individuals turning to the program" (Solomon, 6/23).

Reuters: "The U.S. Senate may find a compromise on helping cash-strapped states pay for healthcare, according to a proposal circulating through Congress on Tuesday, a week before the fiscal year begins in many states. According to the proposal, extra money included in last year's stimulus plan for Medicaid would be extended past its December expiration through the first six months of 2011. But there would be a 'phase-down' of the funds sent to states, shrinking the overall cost of the aid."  The Medicaid extension "was stripped from the House version at the last minute and states fear it will be cut from the Senate bill. Conservatives say a blanket extension of the extra Medicaid boost, estimated to cost $24 billion, will put a country with a $1.4 trillion deficit and $13 billion debt deeper into debt" (Smith and Lambert).

CQ HealthBeat: "Minority Whip Jon Kyl, R-Ariz., said he thought at least some cut in the Medicaid aid would be necessary to get the bill to pass. One key swing voter, Susan Collins, R-Maine, noted that she has long advocated for a phase-down approach to the Medicaid assistance to avoid a cliff for state budgets. ... Olympia J. Snowe, R-Maine, said she has been meeting with Democrats about the bill and that they are looking at an approach that would shrink the cost of the Medicaid provision to $20 billion and use $4 billion in unspent stimulus money to cover some of that cost" (Rubin, 6/22).

The Hill: "The Medicaid funding at issue originated in last year's stimulus bill, when Congress voted to increase the federal portion of Medicaid funding by 6.2 percent. The payments are known as Federal Medical Assistance Percentage (FMAP). The stimulus provision expires at the end of the year, and states have warned they will be forced to lay off teachers and other public servants in order to increase their portion of Medicaid funding" (Heflin, 6/22).

Related, earlier KHN story: Democrats Scale Back Medicare 'Doc Fix,' COBRA Subsidy Extension In Jobs Bill, Medicaid Payments To States Would Also Be Affected By Bill (Villegas, 5/27)

Finally, "a new study claims the costs of Medicaid's long-term care services could cripple states' already-fragile budgets," The Fiscal Times reports. "The Deloitte Center for Health Solutions study, 'Medicaid Long-Term Care: The Ticking Time Bomb,' runs through worst and best-case scenarios: the best being that Medicaid costs as a percentage of state budgets will nearly double by 2030, from the current 20 percent to 35 percent in some states. The worst? These costs will nearly triple, rising to 50 percent of the operating budget in one state — with long-term care accounting for 25 percent of that. 'Obviously, this is not sustainable,' write the authors" (Briody, 6/23).