Medicaid Match Extension Helps, But Falls Short

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Oct 1st, 2010

Medicaid Match Extension Helps, But Falls Short

Council of State Governments

Congress came through with additional Medicaid assistance to help states finish out the 2011 fiscal year—but the aid is an estimated $1.74 billion short of what 24 states had hoped for, according to a survey by The Council of State Governments.

Those 24 states, plus California, assumed the extension of the Medicaid match—called FMAP—in their official 2011 fiscal year budgets. California has yet to pass its 2011 budget. In August, Congress voted to provide all 50 states the additional Medicaid funds—estimated at $14.15 billion by the Federal Funds Information for States—after months of contentious debate. The additional funding ranges from $22 million in North Dakota and $23 million in Wyoming and South Dakota at the low end to $851 million in Texas, $1.41 billion in New York and $1.88 billion in California at the high end.

(The $155 million in additional funding Kentucky received is about $83 million less than the recently enacted state budget assumed the state would get for the current fiscal year.  Kentucky’s FY 2010-12 budget was based on the assumption that the Commonwealth would received about $238 million in additional federal funds.)

The stakes surrounding the funding extension were high. As legislatures and governors finalized state budgets earlier this year, 24 states bet that Congress would extend the enhanced Medicaid match rates included in the 2009 federal stimulus package. The Center on Budget and Policy Priorities estimated in a June report that 900,000 public and private sector jobs would be lost without the extension.

But when the measure finally passed, the six-month extension for January through June 2011 was at a lesser rate than states planned for—and that will push states to put in more of their own state matching funds than during the stimulus, but still somewhat less than the regular state formulas. States that counted on more federal funds than they received will be forced to either reduce overall spending for Medicaid programs or find additional state matching funds. If Congress had not approved the additional funding, however, states would have faced a nearly $9 billion shortfall.

States are grappling with the lesser funding rate in a variety of ways.

Pennsylvania, for example, received an estimated 22 (federal estimate) to 30 percent (state estimate) less than anticipated. Last week, the commonwealth’s Office of Administration announced it would begin furloughing 50 employees to make up some of the gap, while the governor has—among other moves—cut $50 million in education spending and enforced a 1.9 percent funding cut for all executive branch agencies.  

Even before the diminished funding was announced, as Congress debated the merits of the additional funding, states were bracing for the worst. Fearing that Congress would not approve any of the enhanced match extension incorporated into the state’s 2011 fiscal year budget, Georgia Gov. Sonny Perdue ordered a 4 percent cut to state agencies, exempting only K-12 education. The state budget has already been cut more than $3 billion in the last two years, according to the Atlanta Journal Constitution.

The real winners are the states that did not budget the additional funds. Because those states—including California with its budget in limbo—now have an additional estimated $7.3 billion in federal funds, they can either move state general funds they had allocated for Medicaid to other spending areas, or use these state funds to pull down even more federal Medicaid money.

While the additional federal funding will certainly help cash-strapped states in the short term, current enrollment trends and increasing health care costs mean that Medicaid spending will continue to strain state budgets. Nearly all states are finding enrollment is growing faster than expected due to the slow economic recovery, so it is likely many states will face deficits in their Medicaid budgets by the end of the 2011 fiscal year.

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