Cuts to Medicaid restored as result of stimulus

Cuts to Medicaid restored as result of stimulus

The American Recovery and Reinvestment Act of 2009 (ARRA) includes $87 billion in additional temporary federal funding for Medicaid in the form of enhanced federal Medicaid matching funds (FMAP). However, if a state imposes more restrictive eligibility standards, or methods or procedures used to determine eligibility, than the state had in place on July 1, 2008, the state is ineligible for enhanced FMAP.

States that had made such changes are given until June 30, 2009, to change back and still qualify for the full 27 months of enhanced FMAP. "There were a number of states that had made changes in eligibility or the methods and procedures they used to determine eligibility, which have been reversed," says Judy Solomon, a senior fellow at the Center on Budget and Policy Priorities specializing in Medicaid and SCHIP.

State cuts in benefits and provider payments have occurred and still are being considered in some states. However, even without a maintenance-of-effort affecting provider payments and benefits, some states have reversed course on cuts they had plans to make in those areas as well because of the additional matching funds they are receiving. For example, Massachusetts reversed plans to cut provider payments because of the enhanced FMAP.

The enhanced FMAP in the stimulus provides essential relief to states facing increases in Medicaid enrollment due to growing unemployment at the same time that state revenues are decreasing, says Ms. Solomon.

"States have been able to maintain coverage for existing beneficiaries as well as those coming in to the program," says Ms. Solomon. "The enhanced matching funds have also allowed states to avoid cuts in benefits and provider payments that they otherwise would have made."

Theresa Eagleson, Illinois' Medicaid director, says, "Certainly we would have been in much different shape without the enhanced matching funds. We would have had to roll back our funding to FY 2004 levels. That is what we were looking at before the federal funding came through. It probably would have meant some eligibility cuts, and also, we are having a really hard time paying our providers. So, it's helped that situation a lot as well."

The program was holding off with cuts to eligibility or provider rates, in the hopes that the federal help would come through, "and we were lucky that it did," says Ms. Eagleson. "The stimulus money is keeping us from having to do really hard things like cut people off the program this year. Our program has come out in pretty good shape because of this significant influx of federal money, and our ability to use that to preserve what we had."

South Carolina restored a number of changes to eligibility it had made as a result of budget cuts. Those included removing the second year of Transitional Medicaid Assistance, deleting some income disregards that were previously waived, and limiting admissions to the Breast and Cervical Cancer Program.

"We notified CMS in February that we were restoring eligibility to former levels, and they cleared us to begin drawing down the increased FMAP," reports DHHS spokesman Jeff Stensland. "It was an easy call, because any savings we would have realized from the eligibility changes are far outweighed by the additional federal stimulus funds we can now receive. Also, we were pleased that we could maintain services for people who need them."

Cindi Jones, chief deputy director of the Department of Medical Assistance in Virginia, says proposed cuts were restored, which may have affected the Maintenance of Effort provision of the ARRA. "These restorations included all cuts associated with our home and community-based waivers, including a proposed waiting list for one waiver, and an individual cost-effectiveness cap on most waivers," she reports.

Contact Ms. Solomon at (202) 408-1080 or solomon@cbpp.org.