Joy Johnson Wilson, Health Policy Director

1
State Budgets and Medicaid Financing

• Joy Johnson Wilson, Health Policy Director
• National Conference of State Legislatures
• June 24, 2008

2
Quick Medicaid Facts

• Enacted in 1965, Medicaid is the nation's major
  public health coverage program for low-income
  people.
• Medicaid accounts for nearly 20 of all personal
  health care spending and almost 45 of nursing
  home care spending.

3
Quick Medicaid Facts - Financing

• Medicaid is jointly financed by the federal
  government and the states. States administer the
  program under federally established guidelines.
•  The federal contribution to Medicaid spending in
  each state ranges between 50 and 76, depending
  on state per capita income.
• Nationally, the federal government pays 57 of
  Medicaid costs and states pay 43.

4
Quick Medicaid Facts - Financing

• State federal matching rates (FMAP) are adjusted
  annually based on a three-year rolling average.
• There is no mechanism, under current law, that
  adjusts the annual updates differently during an
  economic downturn or natural disaster.

5
Quick Medicaid Facts - Eligibility

• To qualify for Medicaid, individuals must meet
  financial criteria (income and resources) and be
  categorically eligible for the program.
• Eligible individuals are ENTITLED, by federal law
  to Medicaid benefits and services.
• Categorically eligible groups include children,
  parents of dependent children, pregnant women,
  people with disabilities, and the elderly.

6
Quick Medicaid Facts Dual Eligibles

• Dual eligibles, are low-income Medicare
  beneficiaries who also receive Medicaid.
• Medicaid wraps around Medicare
• pays Medicare premiums and cost- sharing and
• covers critical benefits that Medicare does not
  cover, such as long-term care.
• Dual eligibles about account for 40 of Medicaid
  spending.
• Medicaid accounts for nearly half of national
  long-term care spending and finances care for 60
  of nursing home residents.

7
Quick Medicaid Facts - Benefits

• States are required to cover
• inpatient and outpatient hospital services
• physician, midwife, and certified nurse
  practitioner services
• laboratory and x-ray services
• nursing home and home health care for individuals
  over age 21
• early and periodic screening, diagnosis, and
  treatment (EPSDT) for children under age 21
• family planning services and supplies and
• rural health clinic/federally qualified health
  center services.

8
Quick Medicaid Facts - Benefits

• States can also receive federal matching funds
  for many optional services, including
  prescription drugs, prosthetic devices, hearing
  aids, and dental care.

9
Impact of Increase in Unemployment on
Medicaid/SCHIP

• A one percent rise in the nation's unemployment
  rate is projected to increase the number of
  uninsured by 1.1 million and result in an
  additional 1 million (600,000 children and
  400,000 adults) enrolling in Medicaid, increasing
  state Medicaid spending by 1.4 billion.
• SourceKaiser Commission on Medicaid and the
  Uninsured, 2008.

10
Primary State Options to Reduce Medicaid
Expenditures

• Reduce reimbursement to providers
• Reduce/eliminate optional benefits (primarily to
  adult beneficiaries) and
• Reduce/eliminate optional eligibility categories.

11
Federal Fiscal Relief

• In 2003, the Jobs and Growth Tax Relief
  Reconciliation Act provided 20 billion in
  temporary federal fiscal relief to states.
• 10 billion through increasing the federal
  matching rate (FMAP) for Medicaid expenditures.
• 10 billion in general revenue assistance.
• The prospect for similar relief this fiscal year
  appear poor.

12
Medicaid Challenges 2008-2009

• Raising state matching funds
• Economic downturn (lower state revenue
  collections, higher energy costs, higher
  unemployment, distressed local governments)
• Federal initiatives (legislative/regulatory) to
  reduce growth in the Medicaid program
• Continued increase in health care costs
• Reduced federal funding for discretionary health
  programs