With time running out on funds states received last year to keep their Medicaid programs intact, relief may be on the way.
At deadline last week, Sens. Jay Rockefeller (D-W.Va.) and Gordon Smith (R-Ore.) were preparing to introduce a bill that would extend a portion of $20 billion in temporary relief given to states last year to help them deal with their fiscal troubles, including their Medicaid programs.
The temporary funding boost to the federal medical assistance percentage, or FMAP, is set to expire this week. The percentage is used to determine how much each state receives in funding from the federal government for its Medicaid program.
Under the bipartisan proposal, $6 billion would be divided among the states over the course of one year, $4.5 billion of which would go toward Medicaid, said Chris Matthews, a spokesman for Smith. That includes a 1.25% across-the-board increase in the federal match and protections for states that face a cut in federal Medicaid funding. About $1.2 billion of the total allocation would be used to help states cover the administrative costs of implementing the new Medicare law.
The bill would be funded through offsets in government spending, said Matthews, who declined to elaborate. It was unclear whether anyone on the House side was crafting similar legislation.
Sherreta Lane, vice president of reimbursement for the California Healthcare Association, said that generally it's states that benefit from FMAP increases, though hospitals and other providers can also gain. Indeed, some states, including Califor- nia, have reported that without the extra funds provided by last year's boost, they may have had to cut or cut more from their Medicaid reimbursements to providers. California cut its Medicaid reimbursements, "but it could've been more dire without the FMAP increase," Lane said.
Of last year's $20 billion boost, half went to states for Medicaid purposes. The Medicaid funds, which included a 2.95% increase in federal Medicaid matching funds, are set to expire July 1. The other $10 billion, set to expire Oct. 1, was intended for states' other broad purposes. As the expiration of the Medicaid-targeted funds approached, providers, consumer groups and state regulators voiced concern that cuts to the program were inevitable.
"Letting the fiscal relief expire is going to put a number of states in dire straits," said Victoria Wachino, associate director of the Kaiser Commission on Medicaid and the Uninsured.
Cuts or freezes in reimbursement to hospitals and doctors were also looming.
According to a study released in April by the commission, 42 states used the additional $10 billion they received last year to avoid a Medicaid budget shortfall and 27 states said the money helped them avoid cuts or freezes in provider payments or benefits.
A study released this month by the Nelson A. Rockefeller Institute of Government, a public policy think tank, showed that state tax revenue grew 8.1% for the second quarter of 2004 compared with the same period last year. Tax revenue grew 7.3% during the first quarter of this year.
However, Wachino said, revenue still lags far behind what it was just three years ago.
"Although there has been growth, it has not been enough to get them out of the hole the states fell into starting in 2001," when the economy started to tank, she said.
While the funding given by Rockefeller and Smith's proposal is less than last year's $10 billion, Matthews said that is a function of political and budget realities.
"It's really a matter of a realistic chance of passing," Matthews said. "The budget's really tight now and everything is going to be scrutinized."
Last year's temporary funding boost took two years to secure, however, and it is far from certain that the senators' proposal will pass. If the budget process for fiscal 2005 is any indication, many legislators, particularly conservative Republicans, are loath to add to the federal deficit.
"It's an uphill climb," Wachino said.
The White House has favored reforming Medicaid rather than ramping up funding for the program. Last year, the Bush administration unsuccessfully tried to move Medicaid to a block-grant approach. For his fiscal 2005 budget, the president has proposed cutting $24 billion from the program over a 10-year period by weeding out fraud and abuse.