COVID-19'S EFFECT ON STATE BUDGETS AND MEDICAID
The COVID-19 pandemic has had a devastating impact on the country's economy. As of June, the U.S. Bureau of Labor Statistics reported that the national unemployment rate reached 11.1 percent which equates to 17.8 million unemployed people. Many Americans that have lost employer sponsored health insurance are now looking to Medicaid for healthcare coverage. According to the Georgetown University Health Policy Institute, Medicaid enrollment has increased by 5.8 percent in the last three months. In Florida alone, enrollment has almost reached 10 percent. Due to the surge in unemployment and Medicaid enrollment and the decline in revenue, states are experiencing severe budget gaps. As a result, some states have made substantial cuts in funding to their Medicaid programs, the NGA is asking for increased federal funds, and Medicaid programs are likely to focus on cost containment reform to balance their budgets.
STATE BUDGET GAPS AND SPENDING CUTS
By law, states are required to comply with balanced budget requirements that prohibit states from carrying deficits into the upcoming fiscal year. These requirements combined with the surge in Medicaid enrollment are putting tremendous pressure on state budgets. Recently, a few states have made significant spending cuts because of this. In May, Georgia announced a 14 percent reduction in funding to all of its state agencies, Colorado made a $183 million spending cut to its Medicaid program, and Ohio reduced its Medicaid spending by $210 million. Additionally, Arizona and New Mexico have seen surges in Medicaid enrollment that far exceed their predictions. State officials are concerned that they will also have to make major cuts if they do not receive further aid from the federal government.
FEDERAL ASSISTANCE EFFORTS
On March 18th, the Families First Coronavirus Response Act (FFCRA) was enacted in response "to the COVID-19 (i.e., coronavirus disease 2019) outbreak by providing paid sick leave, tax credits, and free COVID-19 testing; expanding food assistance and unemployment benefits; and increasing Medicaid funding." The FFCRA specifically increased the Federal Medical Assistance Percentage (FMAP) to 6.2 percent. All states and territories are eligible for the increased FMAP provided that they follow the maintenance of effort (MOE) protections and the following conditions:
a. Maintain eligibility standards, methodologies, or procedures that are no more restrictive than what the state had in place as of January 1, 2020 (maintenance of effort requirement).
b. Not charge premiums that go beyond those that were in place as of January 1, 2020
c. Cover, without impositions of any cost sharing, testing, services and treatments-- including vaccines, specialized equipment, and therapies-- related to COVID-19.
d.Not terminate individuals from Medicaid if such individuals were enrolled in the program as of the date of the beginning of the emergency period, or becomes enrolled during the emergency period, unless the individual voluntarily terminates eligibility or is no longer a resident of the state.
However, the FFCRA did not take into account the overwhelming surge in enrollment. To better protect public health and recover economic prosperity, the National Governors Association (NGA) is requesting that the Senate earmarks an extra $500 billion to make up for lost revenue. Additionally, the NAG is requesting a temporary increase of FMAP from 6.2 percent to 12 percent. The new percentage would be retroactive to January 1, 2020, and would remain in effect until the national unemployment rate dropped to below 5 percent.
To date, there have been no additional funds allocated and the FMAP has not been increased. On July 22, the NGA issued an additional statement urging the Senate to permit their request.
The NGA states, "Governors have already cut budgets and reduced our payrolls by 1.5 million people, but without Senate action, we will need to make steeper cuts and reduce payrolls even more, at precisely the time when these services are needed most ... We need the Senate's strong support now, so we can fight the virus together and make an economic recovery a reality."
MEDICAID CUTS AND DELIVERY SYSTEM REFORM
Besides federal assistance and budget cuts, states typically control costs by reducing Medicaid benefits including dental coverage or optional Rx benefits. However, in the present public health emergency, these methods are not necessarily plausible because of the MOE protections under the FFCRA. Additionally, reducing Medicaid spending would also reduce needed federal aid. Presently, the federal government pays for about 60 percent of total Medicaid costs. That being said states will probably turn their attention to altering provider reimbursement rates, managed care profit margins, provider taxes, and managed care and delivery system reform to contain costs and balance their budgets.
The public health emergency's effect on the nation's economy and government funded healthcare programs has states facing considerable budget gaps. Some have made tremendous spending cuts that will certainly impede Medicaid's capacity to deliver care when it is needed the most. Many Americans are relying on Medicaid for healthcare and states must do everything in their power to contain costs before reducing benefits or access to care. Aside from federal support from the FFCRA and the NGA's request to increase FMAP, states should focus on further efficiency and cost saving technology solutions in their Medicaid plans before decreasing funding, access to care, and benefits.
