By Stephanie Armour
State leaders are weighing possible cuts to Medicaid services
and health-care benefits to offset rising costs due to a surge of
enrollees who have lost jobs and need health coverage as the
coronavirus pandemic has intensified.
Congress boosted federal matching funds to states for Medicaid
as part of its first coronavirus relief package, but many states
are still struggling to afford the increasing pace of sign-ups in
the program for low income and disabled people. Enrollment for the
fiscal year ending Sept. 30, 2021, is expected to jump 8.2%, with
state spending accelerating by 8.4%, compared with 6.3% growth in
the previous fiscal year, based on data from 42 state Medicaid
directors compiled by the Kaiser Family Foundation.
Medicaid has grown to become one of the largest portions of
state budgets, from about 21% in fiscal 2008 to about 30% in fiscal
2018, according to the National Association of State Budget
Officers.
State leaders working on budgets that must be finalized in July
are confronting budget crises. Tax revenues have tumbled since
March because of restrictions on businesses, social distancing and
high unemployment related to the pandemic, economists have found.
Most states have constitutional or statutory requirements that they
maintain balanced budgets.
Some state leaders may try to narrow the gap between the
revenues they need to balance the budget and the shortfalls they
face by cutting vision and dental benefits, or payments to doctors
and other providers. Cuts to other programs, such as education,
could also be in the mix.
"We are starting to hear as states put budgets together that
they're looking at cuts," said Joan Alker, executive director of
the Center for Children and Families at Georgetown University. Cuts
to health-care providers are typically at the top of the list, she
said.
The Medicaid burden on state budgets will pose a challenge for
President-elect Joe Biden, who wants to expand Medicaid and reduce
the number of uninsured people in the U.S. Amid the coronavirus
pandemic, a politically divided Congress faces pressure to further
increase federal matching funds to states, a proposal that Mr.
Biden has also said he would support. Currently, Congress has been
at loggerheads over additional stimulus legislation.
Congressional Republicans and the Trump administration have
sought to reduce Medicaid enrollment. Republicans say Medicaid
costs must be reined in and states should have more flexibility in
controlling the program. The Trump administration has imposed work
requirements and pursued block grants to those ends.
Washington state's health authority submitted an operating
budget for 2021-2023 that proposes Medicaid cuts, including dental
benefits, as one scenario. Ohio cut $200 million from its Medicaid
budget for the fiscal year ended June 30 and is facing a budget
shortfall for the current fiscal year.
Colorado Democratic Gov. Jared Polis, in an Oct. 28 statement,
cited expectations for lower-than-expected Medicaid enrollment this
year as a means of paying for unemployment stimulus checks, but at
a Nov. 12 budget meeting some state lawmakers raised concerns about
a possible jump in sign-ups.
Wyoming Republican Gov. Mark Gordon's supplemental budget
proposal released Nov. 16 could lead to cuts for health-care
providers who are already seeing their revenues drop due to a
decline in elective medical treatment. The general fund had a
shortfall of $451.1 million in October, about 15% of Wyoming's
total expenditure of $4.7 billion in fiscal 2019, state data
show.
"These are challenging cuts for the state," Mr. Gordon said at a
news conference the day he released the proposal. The reductions
could include a drop in funding for services to the elderly and
community mental health services.
Medicaid has served as a critical safety net during economic
downturns: During the 2007-2009 recession, monthly enrollment rose
by nearly 6 million people, according to the Kaiser Family
Foundation.
The federal government picks up 90% of the cost for people
covered under the Affordable Care Act's Medicaid expansion, but it
matches state expenditures for other beneficiaries in the program.
Under pandemic legislation, states have been getting a 6.2
percentage-point increase in federal funds that match state
expenditures on the program.
Under the public-health emergency declared this year, the extra
provisioning expires at the end of March 2021. Some states and
advocacy groups lobbying Congress say the increase falls far short
of what states need.
"Increasing the federal medical assistance percentage to help
cope with increases in Medicaid costs for states is among the top
issues we've been hearing from governors during the pandemic," said
James Nash, a spokesman for the National Governors Association.
Nationwide, the U.S. state budget shortfall from 2020 through
2022 could amount to about $434 billion, according to data from
Moody's Analytics. The estimates assume no additional federal
fiscal stimulus, further coronavirus-related restrictions on
business and travel, and extra costs for Medicaid amid high
unemployment.
States are limited when it comes to cutting Medicaid enrollment
as a way to curb spending. Federal legislation bars states from
making such changes while getting the current boost in federal
matching funds. The Trump administration in late October granted
states some flexibility to change coverage or enrollment while
receiving the funding.
Cuts to provider payments could sting because doctors and
hospitals may already get reimbursements from Medicaid that are
less than the cost of the services provided or commercial
rates.
"There is no good answer. This is the reason there needs to be
congressional action," said Matt Salo, executive director of the
National Association of Medicaid Directors, a nonprofit that
represents state Medicaid leaders. "This is why we have a federal
government. To support states in a time of crisis. We're not going
to be able to get out of this on our own."
Write to Stephanie Armour at stephanie.armour@wsj.com
(END) Dow Jones Newswires
November 27, 2020 10:14 ET (15:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.