States struggle to keep up with Medicaid costs
2010 was a tough year to be a state Medicaid director.
With states' budgets already squeezed from more than two years of a floundering economy and increased spending on Medicaid as its ranks swelled, the program was a prime target for funding cuts as legislators looked to reduce deficits.
Not surprisingly, the provider community was quick to cite the potentially devastating effects of some of the proposed cuts. In February, Pennsylvania Gov. Ed Rendell's proposed budget for 2010-2011 slashed $31.9 million from its budget for Medicaid payments to hospitals. The move would also cause the state to lose federal matching funds and decrease payments to hospitals by more than $73 million.
"At a time when Medicaid enrollment is increasing and more people are losing health insurance due to unemployment, payments to hospitals who are the healthcare safety net for these Pennsylvanians cannot be cut," said Hospital & Healthsystem Association of Pennsylvania President and CEO Carolyn F. Scanlan.
"Pennsylvania's hospitals are mindful of the budget realities facing Pennsylvania. But the governor and lawmakers need to ensure that hospitals remain viable employers in their communities, where they can provide access to quality care, jobs and job-growth opportunities, support to other businesses and overall stimulus to local economic activity."
In Tennessee, lawmakers and the state hospital association worked to find a solution to fill a $659 million budget deficit. With the blessing of the Tennessee Hospital Association, the state legislature passed a measure calling for a coverage fee of 3.52 percent on net patient revenue for acute care and psychiatric hospitals.
"Hospitals are willing to temporarily 'step into the state's shoes' to fund a significant portion of the TennCare program because we understand the state's revenue crisis," said Craig A. Becker, president and chief executive officer of the THA. "The proposed cuts and limits to be placed on TennCare would have had a devastating impact on patients and hospitals."
While states from California to Maine grappled with funding Medicaid, most were hoping federal lawmakers would provide funding relief via an extension of the Federal Medical Assistance Percentage (FMAP), which had provided states with an extra $90 billion in 2009 as part of the federal stimulus program.
According to a survey by the National Conference of State Legislatures, 30 states reported that their budgets, either proposed or already enacted, assumed Congressional approval of the six-month extension to the FMAP. In August, the assumption became law, as Congress passed a six-month $16.1 FMAP extension through June 2011, in a contentious partisan battle that saw only two Republican Senators, Olympia Snowe and Susan Collins, both of Maine, cross the aisle to support passage.
"We understand that, as our national and state economies continue to struggle, a further extension of the enhanced FMAP is necessary to help states protect against further job losses as the economy slowly turns around," said Snowe and Collins in a joint statement.
While the FMAP bandage was welcome relief, expect more Medicaid budget battles in the coming year. Republicans made significant gains in November's elections and are likely to again target Medicaid. Emboldened Republican legislators in Texas have even suggested the once unthinkable: opting out of the Medicaid system entirely as a way to solve a projected $20 billion budget shortfall – an amount that, coincidentally, is very nearly equal to the state's Medicaid budget.