House health bill includes Medicaid relief for states
Expansion of coverage would come with $23.5 billion in aid

By Aaron C. Davis
Washington Post Staff Writer
Monday, November 16, 2009

Wedged in the House health-care bill is $23.5 billion that looks a lot more like new federal stimulus spending than anything to do with national health-care reform.

The barely debated pot of money would allow Congress to continue pumping billions in new short-term aid to states to cover Medicaid costs that have increased with rising unemployment in the past year.

The potential impact of the new spending became clear last week when giddy state budget officials in capitals from Annapolis to Sacramento penciled in the revenue, hoping that if health-care legislation survives in the Senate, the states' bonus might squeak through.

Medicaid relief for states comprised one of the biggest pieces of February's $787 billion federal stimulus package, but that funding will run out next year, halfway through states' next round of spending plans.

Under the Affordable Health Care for America Act, the federal government would continue to pay a higher share of all Medicaid costs -- 66 percent on average, up from 57 percent before the stimulus -- for an additional six months, and erase in one fell swoop a major chunk of states' projected shortfalls for the coming year.

"It would be a huge help -- critical," said Cindi Jones, chief deputy director of Virginia's Medicaid program, which quickly estimated last week that it would receive an extra $360 million to $380 million next year under the bill. At a meeting last week of the nation's Medicaid directors, Jones said the group is unanimously in favor of the provision.

Said Steve Ford, the department's director of policy and research: "We don't get bogged down in the terminology of what it is -- [more stimulus] or not. We've viewed it as our federal increase . . . which obviously helps the state."

House Republicans, who had repeatedly blasted the cost of the bill, never directly attacked the additional state funding in the final floor debate leading up to the Nov. 7 vote, even as they charged in other contexts in recent weeks that Democrats were trying to increase federal spending without introducing a second stimulus package.

Only one Republican, Rep. Don Young (Alaska), issued a statement before the vote condemning the $23.5 billion, saying the funding would only delay the inevitable. In six months, he said, states again would not have enough to cover their Medicaid costs.

Chris Whatley, Washington director for the nonpartisan Council of State Governments, said he sees an explicit political motive on the part of those backing the House bill. "It would force states to absorb huge new Medicaid cost loads, and they want states to look past their immediate crisis and believe it's going to be okay. It's a sugarcoating to help them swallow a very bitter pill."

Two House Democrats who spoke on the condition of anonymity so that they could freely discuss the provision in closed-door negotiations, said the measure was designed to be a pragmatic solution to the reality that states do not have the capacity to deal with a reversion to regular Medicaid rates. Without another boost in funding to prop them up until their tax revenue rebounds, states would have to severely restrict access to Medicaid and other services for the poor or would have to cut programs, which could necessitate the layoffs of thousands of public employees and further depress the economy.

The two said the provision, which was added to the bill last month, also was part of a more complex set of final tradeoffs to control the cost of the House measure after the chamber's Democratic leadership settled on a goal of extending Medicaid coverage to everyone making up to 150 percent of the poverty rate.

The $23.5 billion in new short-term aid, they said, would partly offset other provisions that would require states to begin paying a tiny fraction of the costs of new Medicaid enrollees in 2015, a year earlier than in previous versions of the legislation. The final House bill also would increase, to 9 percent, states' permanent share of the costs for new enrollees.

"Call it stimulus if you want," one of the Democrats said, "but it's a recognition that it's a dire situation for states that have to run a balanced budget."

John Holahan, a Medicaid expert at the Urban Institute, said that if it had not come up in the course of health-care legislation, it probably was only a matter of time before Congress would have had to address the end of Medicaid stimulus funding.

"When we got into 2010, there was going to be a lot of talk about a need for more stimulus. I guess maybe to avoid that they put it in here," Holahan said. "It was going to come up somehow, we're going to be looking at high unemployment and swollen Medicaid rolls beyond 2010," he said.

The provision, Section 1749 of the House measure, would extend through June 2011 an across-the-board 6.2 percent increase in federal Medicaid matching money, as well as additional percentage-point benefits that most states now qualify for because of high unemployment rates.

In Maryland, the measure would mean $384 million next year in new funding, or enough to cover about 20 percent of the state's projected $1.9 billion shortfall.

Robin Rudowitz, a principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured, said it is unclear whether the six-month fix would be enough. "Most states are not anticipating their revenue to be back up to levels seen before the recession for a few more years," she said. States may still be faced with "previously unthinkable Medicaid cuts when the funding ends."

Raymond C. Scheppach, executive director of the National Governors Association, said that even if the $23.5 billion survives as part of the health-care overhaul, the six-month extension of the stimulus spending would still end too abruptly. "It's sort of like a cliff," he said. States "get the funding for two more quarters, but we would prefer that it ratchet down over a couple more. The cliff is just moved back."

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