Medicaid funding extension hitting roadblocks in Congress

Lawmakers have been unable to adopt a renewal of stimulus Medicaid funding. Governors warn that physician Medicaid pay could be cut.

By Doug Trapp — Posted July 12, 2010

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Congress so far has failed to approve additional Medicaid funding for next year despite warnings from states that without the funds, they will be forced to adopt unprecedented cuts.

Senate Democrats included a $24.2 billion Medicaid provision in a recent jobs bill, but a June 16 motion to end debate and move to final passage -- which required 60 votes to proceed -- failed 56-40. The House on May 28 had removed the six-month, 6.2-percentage-point increase in federal Medicaid funding before adopting its version of a jobs and tax extenders bill.

Senators also rejected a smaller version of the Medicaid funding on a 57-41 vote on June 24. This package would have increased federal Medicaid funding by 3.2 percentage points from January to March 2011 and by 1.2 points from April through June 2011 at a cost of $16.2 billion. Lawmakers return to Washington from their Independence Day break on July 12, but Democratic leaders have not offered a clear path forward on the issue.

Republicans and some fiscally conservative Democrats opposed both Medicaid extensions because they were part of bills not fully offset by revenues or spending cuts, and therefore would increase national deficits. The jobs bill with the smaller Medicaid funding extension would have increased the deficit by $33 billion, according to the Congressional Budget Office.

Senate Finance Committee Chair Max Baucus (D, Mont.) warned in a June 16 statement that the fragile economic recovery is in jeopardy. "We do need to act aggressively to reduce our long-term deficits as the economy enters a phase of expansion. But first we must pull ourselves out of the Great Recession."

After the June 24 vote, Senate Minority Leader Mitch McConnell (R, Ky.) said GOP members would support the extensions of Medicaid, unemployment benefits and other programs if they were paid for in part with unallocated stimulus funding so as not to increase the national debt. Republicans such as McConnell and Sen. Scott Brown (R, Mass.) offered bills to do so.

"If the Democrats object to extending these programs using their own stimulus offset to pay for them, then they'll be saying loud and clear that their commitment to deficit spending trumps their desire to help the unemployed," McConnell said on the Senate floor. Democratic leaders did not accept the alternative proposals.

States are strapped

Ten governors -- including two Republicans -- warned at a June 30 news conference in Washington, D.C., that without the Medicaid funding, their states will be forced to cut more spending than they have in decades. These cuts could affect physician Medicaid pay, said Michigan Gov. Jennifer Granholm.

"The provider rates are one of the solutions on the table. I don't think there's any way we can get around it," she said. The national health reform law requires states to maintain their existing Medicaid eligibility and other program standards, but it does not explicitly protect physician Medicaid pay.

Twenty-nine states have adopted fiscal 2011 budgets that count on states receiving the full $24 billion Medicaid funding extension. Most of these states' 2011 budgets began July 1. States already are facing a combined total of $89 billion in fiscal 2011 deficits, according to the National Conference of State Legislatures.

California Gov. Arnold Schwarzenegger said via video conference that his state expected $1.8 billion from the Medicaid extension. Lawmakers have cut state spending by $60 billion in recent years but are still $20 billion short for fiscal 2011, he said.

"The federal money is critical to preventing deeper pain and deeper job losses," Schwarzenegger said.

Said Granholm: "We are required to provide [Medicaid] services. We are only asking that Congress pay for the services that they have required us to offer."

Pennsylvania Gov. Ed Rendell, who organized the press conference, said federal lawmakers have told governors they would try again to adopt the Medicaid extension when they returned from their break. But they must act quickly to prevent states from enacting necessary cuts, he said.

Rendell said lawmakers should consider what's most important for citizens -- the economic recovery. The federal deficit problem will not be cured in one month or six months, he said. "But can we do something to make sure that we don't lose literally hundreds of thousands of jobs right now?"

Few expand Medicaid early

Although Congress has not yet extended enhanced Medicaid funding, the national health reform law includes a provision expediting federal Medicaid support to cover childless adults years ahead of a major eligibility expansion for this population.

Connecticut had been covering about 45,000 childless adults who earn up to 68% of the federal poverty level through its own program, State-Administered General Assistance, or SAGA. The state had not received federal funding for the program.

But on June 21, the Dept. of Health and Human Services announced it had approved Connecticut's proposal to obtain a 50% federal match to cover the SAGA adults in Medicaid. This will save Connecticut $53 million over 18 months starting in fiscal 2011, according to Connecticut Dept. of Social Services spokesman David Dearborn. The request was approved through a state plan amendment instead of a formal waiver, which shortens the approval process by months.

"For many years, Connecticut has provided state assistance to ensure that our most vulnerable single adults have access to health care," said Connecticut Gov. Jodi Rell. "Now with this federal help, we will be able to provide increased medical benefits for them through Medicaid while relieving the burden on state taxpayers."

The Connecticut State Medical Society supports moving SAGA enrollees to Medicaid, said Ken Ferrucci, the society's vice president of public policy and government affairs.

The health reform law increases Medicaid eligibility to 133% of poverty nationwide in 2014. "We hope other states will follow Connecticut's example and not wait four years to provide health benefits to those who desperately need them," said Marilyn Tavenner, then acting administrator for the Centers for Medicare & Medicaid Services, in a June 21 statement.

But so far, not many states appear to be following suit. At this article's deadline, the District of Columbia was the only other taker when it came to the opportunity to expand Medicaid early.

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State budget woes lead to taxing situations

States say they need more federal Medicaid dollars to help close fiscal 2011 budget deficits, but that's not their only alternative. Taxes on cigarettes and other commercial products are proving popular options for cash-strapped states. Here are some of the new taxes that took effect July 1, the beginning of the fiscal year for most states:

  • New York increased its cigarette tax to $4.35 per pack from $2.75. In New York City, the combined state and local tax per pack rose an additional $1.60 to reach $5.85.
  • South Carolina raised its cigarette tax by 50 cents to reach 57 cents a pack.
  • Utah increased its cigarette tax by 70 cents to reach $1.70 a pack.
  • Hawaii raised its cigarette tax to $3 a pack, a 40-cent increase, and its tax on imported petroleum products to $1.05, a $1 increase.
  • New Mexico raised its cigarette tax to $1.66 a pack from 91 cents.
  • Kansas increased its sales tax by one percentage point to 6.3%.
  • Washington imposed an excise tax on soda of two cents per 12 ounces.

Source: Center on Budget and Policy Priorities

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