Center on Budget and Policy Priorities: Medicaid Funding Boost for States Can't Wait

WASHINGTON, March 13 -- The Center on Budget and Policy Priorities issued the following blog:

The House COVID-19 bill's temporary Medicaid funding boost, if in effect for all of calendar year 2020, would deliver roughly $45 billion in immediate, needed relief to states, which will face growing costs due to the virus and a likely economic downturn. (See table for state-by-state estimates.) Similar measures have been a critical part of economic stimulus packages under both Democratic and Republican administrations, and policymakers should approve the increase as soon as possible. Once this is enacted, policymakers should quickly move to take further bold steps -- including additional Medicaid funding increases, help for workers who lose their jobs, and measures that boost incomes and purchasing power -- to address real hardship created by the current public health emergency and bolster an economy that could rapidly deteriorate.

The House bill's increase -- an 8 percentage point boost in the federal matching rate (known as the federal medical assistance percentage, or FMAP) from January 1, 2020, until the end of the public health emergency -- would:

* Help states address immediate public health needs. Responding to the virus is straining states financially as they move to make testing available, deliver care to infected individuals (particularly those requiring inpatient services), create and support quarantine environments, increase sanitation efforts in public spaces, and ramp up public communications efforts, among other actions. At the same time, state revenues will likely take a hit as the economy slows. A temporary FMAP increase would free up funding that states would otherwise need for Medicaid, enabling them to rapidly invest in critical measures to protect the public's health during the emergency.

* Enable states to use Medicaid to cover COVID-19-related needs. Medicaid gives states wide flexibility to help address the crisis -- from expanding eligibility to cover uninsured people who need testing and care, to broadening coverage of telehealth (i.e., using digital information and communication technologies to deliver health services remotely), to covering certain quarantine-related costs, as Washington State wants to do. A broad increase in federal Medicaid funding is the best way to help states make the targeted Medicaid changes that meet their needs.

* Prevent Medicaid cuts during the public health crisis. Without federal action, state policymakers -- bound by state balanced budget requirements -- face pressure to cut Medicaid costs during economic downturns, history shows. Medicaid enrollment naturally rises during any downturn even as state revenues fall, and a downturn coupled with a public health emergency places extra burdens on Medicaid to provide additional treatment as well. State cuts in eligibility, benefits, and provider payments like those in past recessions would undermine the public health response and create immense hardship for families. The House bill's temporary FMAP increase would avert those cuts by giving states more funds and requiring them, as a condition of receiving them, to maintain current Medicaid eligibility levels throughout the public health emergency.

* Support the economy. With the pandemic likely to trigger an economic downturn, states will require federal fiscal relief to weather the storm. Rising unemployment and falling economic activity shrink state tax revenues even as demand for things like Medicaid and unemployment insurance rises. An FMAP increase is a proven way to deliver swift economic relief that saves or creates jobs and stimulates economic activity.

After raising the FMAP and adopting other policies in the House bill, policymakers should quickly enact additional needed steps to address the public health emergency, the significant threat of a rapid deterioration in the economy, and the fiscal relief states will need as a result of a potentially steep downturn. That could include providing additional or longer-lasting FMAP increases linked to the state of the economy.

One important step would be to increase the federal share of costs for the Affordable Care Act's Medicaid expansion to low-income adults. (The House bill does not include an increase in the federal share of the cost of Medicaid for the expansion population.) The expansion covers over 4 million people age 50 to 64 as well as millions of people of all ages who have chronic health conditions -- two groups at elevated risk for serious complications associated with COVID-19. State actions to restrict coverage for these groups would be highly destructive. Conversely, encouraging more states to adopt the expansion would be among the highest-impact ways to cover more people (particularly those at highest risk for virus-related complications), prevent sharp increases in uninsured rates if people lose their jobs due to a downturn, and provide additional fiscal stimulus to help revive the economy.

See table here (https://www.cbpp.org/blog/medicaid-funding-boost-for-states-cant-wait).