Obama Administration Announces Cuts to Florida’s Special LIP Dollars

In the latest development in Florida’s Medicaid saga, yesterday CMS gave a preliminary response to Florida’s Low Income Pool request. Adhering to the principles outlined in an April 14 letter, CMS indicated that it plans to cut LIP substantially by 55% for the state’s next fiscal year and 75% in the following year – the final year of the managed care waiver.

This letter shows that CMS means business when it comes to directing federal taxpayer dollars in a more responsible direction and adhering to the principles laid out in CMS’ April letter to the state of Florida spelling out their intentions with respect to uncompensated care pools going forward.

Lets look at the numbers

As is generally the case in Florida, there is a lot of confusion about what exactly CMS announced today so here are the facts:

  • The Low Income Pool – like all Medicaid dollars – works on a matching basis and Florida’s match rate is approximately 60/40. So the $1 billion number laid out in the letter is NOT $1 billion in federal funds – it includes state matching dollars (which the state generates through intergovernmental transfers but that is another story!). So its actually $600 million in federal funds and $400 million in state share.
  • For the following year (i.e. state fiscal year 2016-2017) CMS indicates that the fund will be $600 million in total costs which breaks out to $360 million federal and $240 million in state share.
  • The interesting piece about year two is that CMS did the math with respect to how many uninsured Floridians would remain if and when the state fully implemented the Affordable Care Act (i.e. accounting for both marketplace coverage and the Medicaid expansion if Florida moved ahead) and came up with its dollar amount based on an assumption that 25% of those costs would remain. This piece speaks to the principle CMS articulated in April that it would not provide supplemental pool funding for those persons who would be eligible under Medicaid if the state chose to move forward.

Cuts to Federal Lip Funding

How does this impact the debate in Florida?

The Florida House and Senate will convene a special session on June 1st to pass a budget and decide whether or not to move forward on the Senate’s proposal to accept the federal Medicaid dollars – or some variant of it.

In a memo to his colleagues, Senate President Andy Gardiner wrote that the CMS letter “brings certainty to what we have known for over a year – the LIP program is changing and Florida needs a new way to address uncompensated care.” He wrote that it is clear that “a sustainable long-term solution is needed.” Gardiner continued: “While we may not agree with every policy decision that comes from the federal government, I do agree that coverage, rather than backend supplemental payments, is a better investment for our taxpayers.”

Senator Gardiner got it right and brings to mind a very important point. The LIP — no matter what funding level — is not a health coverage program. Not a single Floridian will be covered by LIP and be assured access to primary and preventive care or financial security – at whatever level the LIP receives funding. Florida will continue to carry a substantial load on its health care system because so many Floridians are uninsured – in 2013 Florida ranked 50th in the country for uninsured adults.

If the state moves forward with the Senate plan, depending on the take-up rate, the state can bring in $2-4 billion in federal Medicaid funds at no cost to the state for FY2015-2016. That’s an amazing return on investment. The state is looking at a cut of $700 million in federal LIP funding for the current budget under consideration and just under $1 billion in the following year. And the remaining LIP dollars require a 60/40 state match. So already a worse deal. And, as CMS’ letter makes clear, taking LIP to the bank to prop up Florida’s budget and seriously challenged health care system is no longer a viable strategy.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.