By Tara Mancini
As our readers know, Medicaid is a public insurance program financed jointly by states and the federal government to assist low-income individuals and families in obtaining health insurance. Using state specific formulas known as FMAP, the federal government provides at least $1 in matching funds for every $1 spent by states. During the economic recession, the Recovery Act increased federal government contributions to Medicaid. The expiration of those federal funds on June 30, 2011, in addition to ongoing state revenue shortfalls, means that states have to make smart choices when figuring out how to meet all of their commitments – including the commitment to uphold their promise to those who rely upon Medicaid for their health care coverage.
We took a look at NASBO’s 2011 Fiscal Survey of States, released in May, for indications of what changes states will likely make to the program. The recent expansion in Medicaid spending is due in large part to a 5.4% increase in enrollment. As the economy has continued to recover slowly, many individuals and families remain without employment-based health insurance coverage due to loss of job or cutbacks in benefits. Medicaid has responded successfully to the economic downturn by providing coverage to more low-income individuals and families, as it is intended to do.
Even as states have received larger federal contributions, all but seven states have implemented some form of Medicaid cost containment. While this inevitably means cuts to the program, the stability protections (i.e., maintenance-of-effort requirements) provide a safeguard by precluding states from rolling back Medicaid eligibility for children and adults alike, as well as CHIP coverage for children. The most widespread strategies used by states included: the reduction of provider payments (24 states), limiting spending on prescription drugs (23 states), and limiting benefits (20 states). In trying to seek a balanced approach, 15 states raised revenues for Medicaid — either through provider taxes and fees or other cost sharing measures, while Illinois did both.
How are states coping with the task of contributing a bigger portion of Medicaid financing in 2012? It should be no surprise that the decline in overall Medicaid spending in 2012 will invite more cuts; the aforementioned cost containment measures will likely gain popularity with at least half of the states. Moreover, the number of states looking to expand managed care for 2012 has more than doubled from 2011. While managed care can create savings over time, its ability to provide quality care is questionable in a strictly budget cutting environment.
On the bright side, states expect a smaller expansion in Medicaid enrollment next year (3.8%), at the same time that revenues are beginning to rebound. For instance, in fiscal year 2012, states anticipate a growth of 2.1% in total general fund tax revenue, and governors in 40 states have recommended higher general fund spending.
Additionally, the Affordable Care Act provides states with avenues for saving, such as a 100% match rate for the newly-eligible in Medicaid, compared to the average 57% matching rate. There is also the option of providing care for those with chronic health conditions through health homes, which is recognized for improving patient care and reducing costs. Next week, we will blog about some of these trends.
