Families First’s Medicaid Funding Boost a Useful First Step, But Far From Enough

Update, May 13: For revised estimates of the Families First provision based on newly available data, see this post.

The Families First Coronavirus Response Act’s temporary Medicaid funding boost, if it remains in effect for all of 2020, will deliver about $40 billion in immediate, needed relief to states, which will face growing costs due to the virus and a deep economic downturn. But the increase is far from enough, and federal policymakers should heed calls from bipartisan organizations such as the National Governors Association and National Association of Medicaid Directors to enact additional, longer-lasting Medicaid funding increases.

Families First provides a 6.2 percentage point boost in the federal matching rate (i.e., the federal medical assistance percentage, or FMAP) from January 1, 2020, until the Secretary of Health and Human Services ends the official public health emergency. The funding will amount to about $40 billion for states in calendar 2020, the Congressional Budget Office (CBO) projects, assuming the public health emergency lasts at least through the end of this year.

The table below provides preliminary, rough estimates of the additional funding that states may get in 2020. The estimates are based on 2018 Medicaid expenditures, so states’ actual funding will differ from these projections if their expenditures have grown more quickly or more slowly than the growth rates that CBO projects for national Medicaid expenditures since 2018. Meanwhile, total funding from the FMAP increase will likely exceed both CBO’s and our estimates, since neither accounts for the almost certain growth in Medicaid enrollment as unemployment rises in the coming months.

Families First’s FMAP increase, which states are already receiving, is helping them address immediate public health needs, including through Medicaid; stave off Medicaid and other budget cuts due to mid-year budget shortfalls; and support the economy. But with states facing unprecedented budget shortfalls and growing demand for Medicaid coverage and services due to the economic and public health crises, they need far more help.

Notably, Families First’s 6.2 percentage point FMAP increase is much less than what states received from the 2009 Recovery Act, which included an initial 6.2 percentage point FMAP increase to all states plus increases based on state economic conditions. States’ FMAP rose by an average of almost 10 percentage points and a maximum of more than 11 percentage points.

Policymakers should quickly enact additional steps to address the public health emergency, a rapid and steep economic downturn, and the fiscal relief that states will need as a result. This should include additional and longer-lasting FMAP increases linked to the state of the economy.

Also, the President and Congress should increase the federal share of costs for the Affordable Care Act’s (ACA) Medicaid expansion to low-income adults. (The Families First increase doesn’t apply to the expansion population.) Now that 35 states and the District of Columbia have expanded Medicaid under the ACA, the expansion covers over 4 million people age 50 to 64 as well as millions of people of all ages who have chronic health conditions —groups at elevated risk for serious complications associated with COVID-19.

State actions to restrict coverage for these groups would be highly destructive. Conversely, convincing more states to adopt the expansion would be among the highest-impact ways to cover more people (particularly those at highest risk for virus-related complications) and prevent sharp increases in uninsured rates as people lose their jobs during the economic downturn.