Congress Should Reject Attempts to Weaken Medicaid Protections Enacted in Bipartisan COVID-19 Response Bill

WASHINGTON, March 31 -- The Center on Budget and Policy Priorities issued the following news release:

States received a significant temporary increase in federal Medicaid funding in the bipartisan Families First Coronavirus Response Act, which was signed into law on March 18. In exchange for this increase in federal funding, they can't impose new Medicaid eligibility restrictions, or take away people's coverage, during the public health emergency. Now, some policymakers are trying to weaken or eliminate these beneficiary protections, after failing in an effort to do so in the newly enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act. Congress should again reject these attempts, which could cost hundreds of thousands of people (or more) their health insurance in the midst of a pandemic and severe economic downturn.

Temporary increases in the share of Medicaid costs paid by the federal government (known as the federal medical assistance percentage, or FMAP), such as those in the 2009 Recovery Act and the 2003 stimulus bill enacted under President Bush, have generally included protections -- known as "maintenance of effort" (MOE) requirements -- to prevent states that take the federal money from cutting their Medicaid programs. These requirements keep states from effectively diverting to other parts of their budgets the federal dollars intended to help them keep their Medicaid programs intact. The Families First Coronavirus Response Act includes an especially strong MOE, because the public health crisis heightens the urgency of people keeping their coverage. In addition to preventing states from introducing new, more restrictive eligibility rules, procedures, or methodologies (as the Recovery Act did), it also prevents states from terminating beneficiaries' coverage for the duration of the public health emergency.

Unfortunately, some are now trying to convince Congress that the next round of legislation dealing with the pandemic and recession should weaken these important protections. At the end of the debate on the CARES Act, Senate Republicans sought to insert language that would have let states terminate people's coverage while receiving the added federal funds. Although lawmakers rightly rejected that language, some members of Congress and Republican governors will likely push to include it in the next COVID-19 response bill. Meanwhile, New York Governor Andrew Cuomo is also urging Congress to weaken these Medicaid protections in future stimulus legislation, in order to let New York institute a package of Medicaid changes to reduce expenditures, some of which it would otherwise have to delay.

Weakening the MOE protections, however, could cause hundreds of thousands of people (or more) to lose coverage and become uninsured in the months ahead.

If the current MOE provision preventing states from introducing new and more restrictive eligibility standards, methodologies, or procedures is dropped or weakened, states could erect the kinds of barriers to coverage that many adopted in previous recessions. When MOE requirements preventing such actions were not in place, states sought to lower their Medicaid costs by creating significant obstacles to getting and keeping coverage, such as imposing premiums, requiring consumers to provide increased paperwork and verification, or decreasing the staff available to help people complete applications and renewals.

It's already clear that the current public health crisis hasn't stopped some state policymakers from pushing harmful changes. On March 16 Governor Kevin Stitt of Oklahoma unveiled a proposal for a Medicaid block grant with harsh eligibility restrictions. Earlier in the month, the Iowa state Senate passed a bill that would take coverage away from people not meeting work requirements. Absent a strong MOE, more states would likely take steps to restrict eligibility or impose new procedural barriers that make it harder for people to get coverage, especially as the recession shrinks state revenues and creates state budget shortfalls.

Meanwhile, if the provision of the MOE that prevents states from terminating coverage during the public health emergency were abandoned, people who lose their jobs or experience sharp drops in income could lose coverage as a result of wage matching against outdated data that do not reflect the individuals' loss of income in recent days and weeks. For people who lose their jobs or see sharp reductions in income, the periodic data matches that states conduct against lagged earnings records will often significantly overstate current income levels. If states continue to terminate coverage based on these checks or require people to submit extra paperwork to prove their income and keep their coverage, large numbers of people will likely lose coverage just when they need it most.

This provision of the MOE also frees up state staff resources: by freezing coverage terminations during the public health emergency, it lets states redirect staff toward processing new Medicaid applications instead. That's important because applications are likely to surge in coming months as more people lose jobs and job-based coverage, while social distancing measures have forced states to close eligibility offices, and many state caseworkers can't work full time due to caregiving responsibilities while schools are closed or to their own health concerns.

To be sure, states are understandably concerned about the large budget shortfalls that are emerging: they expect sharp drops in revenues due to social distancing measures and recession, along with large direct costs for the COVID-19 response. And the virus has hit New York state's health system and economy particularly hard.

But states will receive an estimated $36 billion from the temporary increase in the federal share of Medicaid costs enacted in the Families First Coronavirus Response Act, plus over $150 billion from provisions of the new CARES Act. For New York in particular, the FMAP increase alone will be worth billions of dollars -- many times the amount the state expects to save in the first year from the subset of its proposed Medicaid plan that it might have to delay because of the MOE.

It's eminently reasonable for the federal government to require states receiving increased funds not to take away people's coverage or make it harder for them to enroll during this public health emergency. These requirements are crucial to protecting coverage for both those covered by Medicaid today and those who will need Medicaid as they lose jobs or incomes in coming months.