House HEROES Act Bill Would Provide Significant Further Support for State Medicaid Programs

As I have previously written, while helpful, the temporary 6.2 percentage point increase in the federal Medicaid matching rate (FMAP) provided by the Families First COVID-19 response legislation (P.L. 116-127) is clearly insufficient to address the sharply higher state Medicaid costs and overall budget deficits states will experience in this health and economic crisis.  That is why the bipartisan National Governors Association and the National Association of Medicaid Directors have both urged Congress to provide additional, large FMAP increases.

On May 12, the House leadership unveiled a new COVID-19 response bill, known as the Health and Economic Recovery Omnibus Emergency Solutions Act or HEROES Act (H.R. 6800).  The House is expected to vote on the bill on Friday, May 15.  The bill would provide critically needed federal support for state Medicaid programs:

Provides additional FMAP increase.

The bill includes a total increase of 14 percentage points to the regular FMAP for one year starting July 1, 2020 (including the Families First 6.2 percentage point increase).  This means the regular FMAP would be 6.2 percentage points higher between January 1, 2020 and June 30, 2020, it would be 14 percentage points higher between July 1, 2020 and June 30, 2021 and starting July 1, 2021, would be 6.2 percentage points higher until the end of the public health emergency (assuming the emergency extends past the end of June 2021).  The resulting FMAP may not exceed 95 percent.  Like the Families First Act’s FMAP increase, this FMAP increase would not apply to the Medicaid expansion or administrative spending.  But it would have the effect of further increasing the federal matching rate for the Children’s Health Insurance Program (CHIP) by as much as 9.8 percentage points for one year starting July 1, 2020 (including the Families First 4.34 percentage point increase) as well.  It would also have the effect of lowering the so-called prescription drug “clawback” payments states pay the federal government related to those dually eligible for both Medicare and Medicaid.  The Families First maintenance-of-effort (MOE) requirement related to the FMAP increase would continue to apply.  That requirement prohibits states from cutting Medicaid eligibility, making it harder to enroll, disenrolling those previously enrolled or newly enrolling, charging higher premiums, increasing cost-sharing and reducing benefits during the public health emergency.

Blocks Medicaid Fiscal Accountability Rule (MFAR).

As the National Governors Association and the National Association of Medicaid Directors have previously requested, the bill would prevent the Trump Administration from finalizing its damaging MFAR rule for the duration of the public health emergency.  As we have previously explained, the rule, if finalized, would lead to significant Medicaid cuts, substantially worsen state budget deficits and undercut the benefits to states of the FMAP increase that has already been provided in the Families First Act (and any additional FMAP increase including the increase in the HEROES Act bill and any other fiscal relief outside of Medicaid that Congress provides).

The bill would also provide considerable, much-needed fiscal relief to states outside of Medicaid.  For example, it would establish a Coronavirus State Fiscal Relief Fund that would provide $500 billion to states, consistent with the request of the National Governors Association, as well as provide $20 billion to Puerto Rico and the other territories and $20 billion to tribal governments.  The bill would also supercede a Treasury Department ruling that barred states from using $110 billion in general fiscal relief included in the CARES Act (P.L. 116-136) to close budget gaps caused by revenue declines resulting from the COVID-19 related recession.  Under the HEROES Act states would be able to use those funds to replace revenue losses.

(Additional blog posts will examine other aspects of the HEROES Act bill including the impact of the FMAP increase on CHIP and on several other Medicaid provisions.)

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.