Senate tries to restore Medicaid to jobs bill

States said they are counting on the $24 billion in additional support.

By Doug Trapp — Posted June 14, 2010

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The House late in May adopted a jobs bill without an extension of enhanced Medicaid funding, prompting a scramble from Senate Democrats to add back the Medicaid support.

Senate Majority Leader Harry Reid (D, Nev.) threw his support behind a jobs bill substitute amendment introduced June 8 by Senate Finance Committee Chair Max Baucus (D, Mont.), which included the additional Medicaid funding. But the bill still faced resistance from fiscal conservatives.

House Speaker Nancy Pelosi (D, Calif.) had vowed that the House eventually would adopt both the Medicaid funding and extra health assistance for the unemployed, provisions that were removed from the jobs package after conservative Democrats complained the funding wasn't offset by new revenues or spending cuts.

Instead of adopting the original American Jobs and Closing Tax Loopholes Act of 2010, House lawmakers on May 28 stripped out the $24 billion enhanced Medicaid funding extension and an $8 billion COBRA extension. At the same time, they scaled back a Medicare physician pay patch to 19 months, effective June 1, a move that would reduce the price tag by about $40 billion compared with the 3½-year patch the House had been considering.

At this article's deadline, the Senate was considering the substitute for the House jobs bill. If adopted, the revised measure would need to go back to the House for another vote.

Advocates focused their attention on the Senate as it prepared to take up the legislation. The American Medical Association unveiled an advertising campaign calling on the upper chamber to reverse the Medicare cut that took effect June 1, and the liberal consumer advocacy group Families USA released a report highlighting the increased health insurance costs faced by laid-off workers. State associations also ramped up their activity.

The COBRA extension would have paid for 65% of the health insurance premiums for laid-off workers. The jobs legislation would have extended eligibility for the subsidy through Dec. 31, but instead it ended on June 1. The bill retained a number of other benefit extensions for the unemployed.

"Such a loss of health coverage flies in the face of the recently enacted health reform legislation that is intended to expand health coverage to tens of millions of people," said Families USA Executive Director Ron Pollack.

States counting on Congress

State leaders say they are relying on the enhanced federal Medicaid funding. The federal government pays for 57% of Medicaid costs on average, but last year's economic stimulus package increased that by at least six percentage points through Dec. 31, 2010. Medicaid directors have said the support helped prevent significant program cuts, including reductions in physician pay.

The Senate version of the jobs bill would continue enhanced Medicaid stimulus funding through June 30, 2011. The House and the Senate this year have adopted the Medicaid extension in separate measures, but not in the same bill. The provision had seemed to be enough of a done deal that at least 33 states as of late April proposed or adopted budgets that took the additional federal dollars into account, according to the National Conference of State Legislatures.

Although states are seeing recovery signs, they might not rebound fully from the recession until 2013, according to a National Assn. of State Budget Officers survey released June 3. States expect their fiscal 2011 revenues to grow by 3.6% over 2010 to reach $496 billion. But that still leaves states with 8% less cash than they had in 2008 and more than $100 billion in expected deficits.

"Because states lag behind national recovery, they expect 2011 to be as bad as 2010, and states will not begin the path to recovery until 2012," said Raymond C. Scheppach, PhD, executive director of the National Governors Assn., which co-sponsored the survey.

California is one of the states feeling the most financial pressure. California Gov. Arnold Schwarzenegger and the Legislature are trying to solve a roughly $18 billion fiscal 2010-11 deficit. That deficit would grow without the at least $1.5 billion in Medicaid funding they hope the jobs bill will provide. "We're left with nothing but tough choices," he said May 14.

Schwarzenegger has proposed ending welfare in California and adding co-pays to Medicaid. The health reform law effectively prohibits the Medicaid eligibility reductions Schwarzenegger had proposed in January. Exactly how the state can further change Medicaid is not clear yet, said David Ford, associate director of medical and regulatory policy at the California Medical Assn.

Big expansion, small cost?

The medium-term picture on state Medicaid spending is brighter than the short-term, according to an analysis released in late May by the Kaiser Family Foundation.

The health reform law is expanding Medicaid eligibility to 133% of the federal poverty level starting in 2014, covering about 16 million more people. By 2019, some states will have spent less on Medicaid under the reform law than they would have otherwise, the report estimated. These states already had enacted coverage expansions to childless adults.

But the additional amount any one state would be expected to spend on Medicaid under health reform would not break the 8% mark, and most states would spend less than 5% on top of what they would have otherwise, according to the analysis. "For a relatively small investment of state dollars, states could see huge returns in terms of additional coverage for their lowest-income residents," said Diane Rowland, ScD, executive director of the Kaiser Commission on Medicaid and the Uninsured.

Still, many governors remain concerned about their state's Medicaid obligations. The federal match for the Medicaid expansion population dips to 90% in 2020 and remains there. At least 21 states are suing the federal government to repeal the health reform law, partly because of the mandatory Medicaid expansion. They would be insuring more people and thus could see higher costs than do other states in the long term, according to a study published in the June Health Affairs. On average, 39% of Medicaid-eligible adults in these 21 states are uninsured, compared with 26% in other states.

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Paying for Medicaid expansion

The federal government will, on average, pay for 92.5% to 95.4% of the costs of expanding Medicaid eligibility from 2014 to 2019, including all of the costs from 2014 to 2016. States that already have expanded Medicaid eligibility will not see costs rise as much and could pay less than they are paying now.

Changes in state Medicaid spending under health reform, 2014-19*
Drop or lowest growth in state spending
Massachusetts -2.1% -$1.27 billion
Maine -1.5% -$118 million
Vermont -0.6% -$26 million
Hawaii -0.5% -$28 million
New York 0.0% $50 million
Delaware 0.1% $3 million
Arizona 0.2% $56 million
Rhode Island 0.7% $70 million
District of Columbia 0.9% $42 million
Wisconsin 0.9% $205 million
Highest growth in state spending
Mississippi 4.8% $429 million
Arkansas 4.7% $455 million
Oklahoma 4.0% $549 million
Montana 3.7% $100 million
Utah 3.7% $174 million
Alabama 3.6% $470 million
South Carolina 3.6% $470 million
Oregon 3.6% $438 million
Kentucky 3.5% $515 million
Texas 3.0% $2.62 billion

*Assumes an enrollment rate similar to the state's rate prior to health reform enactment

Source: "Medicaid Coverage and Spending in Health Reform: National and State-By-State Results for Adults at or Below 133% FPL," Kaiser Family Foundation, May (link)

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Medicaid programs counting on extension

At least 33 states as of late April had proposed or adopted fiscal 2011 budgets that anticipated additional federal stimulus Medicaid funding. The states expecting to receive the 10 largest shares of the funding:

California $1.5 billion
New York $1.1 billion
Texas $900.0 million
Pennsylvania $848.5 million
Illinois $737.0 million
Massachusetts $689.0 million
Michigan $514.0 million
North Carolina $499.0 million
New Jersey $490.0 million
Washington $479.8 million

Source: National Conference of State Legislatures, letter to Sens. Harry Reid (D, Nev.), Mitch McConnell (R, Ky.), June 3 (link)

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