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States to Get Enhanced Medicaid Funding Through 2021

Jennifer Sullivan | 2/1/2021 | Center on Budget and Policy Priorities

The Biden Administration intends to keep the national Public Health Emergency (PHE) in place through “at least” 2021, the Department of Health and Human Services recently told governors, and that has important implications for states. Last year’s Families First Coronavirus Relief Act gives states a 6.2 percentage-point increase in their federal share of Medicaid spending (i.e., the federal medical assistance percentage, or FMAP) as long as the PHE is in place, which helps them cover higher costs related to COVID-19 and prevent damaging budget cuts.

The Trump Administration declared the PHE in January of 2020 and renewed it in 90-day increments, most recently on January 7, 2021. Uncertainty about the PHE’s duration and the additional relief that comes with it prompted some states to consider or enact Medicaid cuts last year. (To receive the FMAP increase, states may not cut eligibility or make it harder to enroll in or retain Medicaid; instead, states have enacted other health-related cuts such as reducing provider payment rates and cutting non-Medicaid behavioral health services.)

While reassuring governors that the PHE will be renewed through 2021 — so the additional relief will continue for at least 11 months — the Biden Administration also committed to giving states 60 days’ notice before ending the PHE. All of that will give states greater predictability as they begin this year’s legislative sessions, at a time when state revenues for the current fiscal year are down an estimated 7.8 percent compared to pre-COVID projections.

As our estimates in the table below show, states can count on $44.5 billion in additional relief for calendar 2021 (about $22.5 billion for the July-December period, which is the first half of the new fiscal year for most states), which should help states avert unnecessary, potentially damaging cuts as they craft their budgets for the coming year.

These additional federal dollars help states to:

  • Continue to respond to rapidly changing public health needs. COVID-19 continues to strain states financially as they build the infrastructure to deliver vaccinations, make testing more widely available, deliver care to infected individuals (particularly those requiring inpatient care), create and support quarantine environments, and ramp up public communications efforts and contact tracing, among other actions.
  • Use Medicaid to cover COVID-19-related needs. Medicaid gives states wide flexibility to help address the crisis — from expanding eligibility to cover uninsured people who need vaccinations as well as testing and care, to broadening coverage of telehealth, covering certain quarantine-related costs, and expanding the availability of home- and community-based services. The enhanced FMAP helps states invest in targeted Medicaid changes that meet their needs.
  • Prevent Medicaid cuts during the public health crisis. State policymakers — bound by balanced budget requirements — face pressure to cut Medicaid costs during economic downturns, history shows. Medicaid enrollment naturally rises during any downturn, while state revenues fall. Indeed, Medicaid enrollment has risen steadilysince the pandemic began. A downturn coupled with a public health emergency puts extra burdens on Medicaid to provide additional treatment. The FMAP increase has helped bolster the public health response and ensured that Medicaid remains available to those who need it, including millions of workers in essential or front-line industries.
  • Weather the economic downturn. Rising unemployment and falling economic activity have dramatically reduced state tax revenues while demand for programs like Medicaid and unemployment insurance has risen. States urgently need additionalfiscal relief, but the FMAP increase has provided an important cushion, freeing up funding that states would otherwise need for Medicaid and enabling them to sustain funding for other critical needs.
TABLE 1
Preliminary Estimates of Increase in Federal Funding from FMAP Increase Under Enacted Legislation, Based on Urban Institute State Expenditure Projections
Assumes increase is in effect Jan. 1, 2020 - Dec. 31, 2021
  Additional federal funding due to 6.2% point FMAP increase (in $millions)
State Total
(24 months)
Jan-Jun 2020 (6 months) Jul-Dec 2020 (6 months) Jan-Jun 2021 (6 months) Jul-Dec 2021 (6 months)
United States 86,540 20,720 21,330 21,940 22,560
Alabama 1,150 270 280 290 300
Alaska 280 70 70 70 70
Arizona 1,740 410 430 440 460
Arkansas 890 210 220 230 230
California 10,530 2,530 2,600 2,670 2,730
Colorado 1,080 260 270 270 280
Connecticut 1,380 330 340 350 360
Delaware 330 80 80 80 90
District of Columbia 400 100 100 100 100
Florida 3,920 940 970 990 1,020
Georgia 2,570 610 630 650 680
Hawaii 460 110 110 120 130
Idaho 670 160 160 170 180
Illinois 2,150 510 530 540 560
Indiana 1,790 430 440 450 470
Iowa 690 160 170 170 180
Kansas 440 100 110 110 120
Kentucky 1,250 300 310 320 330
Louisiana 1,420 340 350 360 370
Maine 590 140 140 150 150
Maryland 1,550 370 380 390 400
Massachusetts 2,530 610 620 640 660
Michigan 2,260 540 560 570 590
Minnesota 2,040 490 500 520 530
Mississippi 1,010 240 250 260 260
Missouri 1,920 460 470 490 500
Montana 510 120 120 130 140
Nebraska 420 100 100 110 110
Nevada 540 130 130 140 140
New Hampshire 350 80 90 90 90
New Jersey 1,810 430 450 460 470
New Mexico 740 180 180 190 200
New York 8,150 1,960 2,010 2,070 2,120
North Carolina 2,700 650 670 680 700
North Dakota 250 60 60 60 70
Ohio 3,170 760 780 800 820
Oklahoma 950 230 240 240 250
Oregon 1,130 270 280 290 290
Pennsylvania 4,130 990 1,020 1,050 1,070
Rhode Island 390 90 90 100 100
South Carolina 1,150 270 280 290 300
South Dakota 200 50 50 50 50
Tennessee 1,740 420 430 440 450
Texas 6,530 1,570 1,610 1,660 1,690
Utah 520 130 130 130 140
Vermont 280 70 70 70 70
Virginia 2,080 490 510 530 550
Washington 1,630 390 400 410 420
West Virginia 570 140 140 150 150
Wisconsin 1,380 330 340 350 360
Wyoming 180 40 40 40 50

Source: CBPP analysis using Urban Institute estimates of Medicaid spending (2020), Children's Health Insurance Program (CHIP) administrative spending data (2017), Medicare Part D state "clawback" payment data gathered by the National Association of State Budget Officers (2018), Congressional Budget Office (CBO) baseline data, and Centers for Medicare and Medicaid Services (CMS) spending projection data.

For fiscal year 2021 and fiscal year 2022 expenditures, we inflate 2020 total traditional (non-expansion group) Medicaid spending from the Urban Institute using CBO's baseline estimates. We assume the federal share of all traditional Medicaid spending is increased by 6.2 percentage points in each state from January 1, 2021 through December 31, 2021. We do not account for differences in the federal matching rate for various services in traditional Medicaid, or for the growth in Medicaid enrollment due to the economic downturn.

The FMAP increase applies not only to Medicaid expenditures, but also to expenditures for other programs that use the FMAP to determine the federal and state shares of spending. These include CHIP and Medicare Part D prescription drug expenditures for low-income adults. In general, the 6.2 percentage-point FMAP increase will lead to a 4.34 percentage-point increase in the federal share of CHIP costs and a 4.65 percentage-point increase in the federal share of Part D costs. To project these funding increases, we inflate 2017 CHIP spending to 2021 and 2022 using CMS' cost growth projections for CHIP and inflate 2018 Medicare Part D prescription drug payments for low-income adults by CBO's Medicare baseline estimates. Note that for CHIP, we assume the combination of states' annual CHIP allotments and available redistribution funds will be enough to support this additional federal spending in each state.

Read more: https://www.cbpp.org/blog/states-to-get-enhanced-medicaid-funding-through-2021

Categories: Medicaid Watch