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

April 21, 2020 at 10:45 AM

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.

Preliminary Estimates of Increase in Federal Funding From FMAP Increase Under Families First Coronavirus Response Act, Based on 2018 State Expenditures
Assumes increase is in effect Jan. 1-Dec. 31, 2020
State Additional federal funding due to FMAP increase
(in $millions)
Alabama 430
Alaska 120
Arizona 700
Arkansas 320
California 5,030
Colorado 530
Connecticut 450
Delaware 150
District of Columbia 160
Florida 1,690
Georgia 990
Hawaii 210
Idaho 280
Illinois 1,170
Indiana 690
Iowa 350
Kansas 270
Kentucky 520
Louisiana 570
Maine 230
Maryland 640
Massachusetts 1,080
Michigan 860
Minnesota 750
Mississippi 390
Missouri 720
Montana 200
Nebraska 170
Nevada 210
New Hampshire 140
New Jersey 840
New Mexico 330
New York *
North Carolina 960
North Dakota 100
Ohio 1,250
Oklahoma 360
Oregon 470
Pennsylvania 1,740
Rhode Island 220
South Carolina 460
South Dakota 70
Tennessee 680
Texas 2,680
Utah 180
Vermont 100
Virginia 930
Washington 620
West Virginia 200
Wisconsin 840
Wyoming 70

* Anomalies in New York’s 2017 and 2018 expenditure data make the historical data a poor guide for what the state will receive from the Families First Act. Using these data, but attempting to account for anomalies, our best estimate is that New York will receive $4 to $5 billion in additional funding.

Source: CBPP analysis using most recent available Medicaid administrative spending data (2018), Children’s Health Insurance Program (CHIP) administrative spending data (2017), Medicare Part D state “clawback” payment data gathered by the National Association of State Budget Officers (2018), Congressional Budget Office (CBO) baseline data, and Centers for Medicare & Medicaid Services’ (CMS) spending projection data.

We inflate 2018 total traditional (non-expansion-group) Medicaid spending to 2020 using CBO’s baseline estimates. We assume Families First will increase the federal share of all traditional Medicaid spending by 6.2 percentage points in each state. We do not account for differences in the federal matching rate for various services in traditional Medicaid. We also do not attempt to account for the growth in Medicaid enrollment likely to result from the economic downturn.

The FMAP increase applies not only to Medicaid expenditures, but also to expenditures for other programs that use the FMAP to determine the federal and state shares of spending. These include CHIP expenditures and Medicare Part D prescription drug expenditures for low-income adults. In general, the 6.2 percentage point FMAP increase will lead to a 4.34 percentage point increase in the federal share of CHIP costs and a 4.65 percentage point increase in the federal share of Part D costs. To project these funding increases, we inflate 2017 CHIP spending to 2020 using CMS’ cost growth projections for CHIP and we inflate 2018 Medicare Part D prescription drug payments for low-income adults by CBO’s Medicare baseline estimates. Note that for CHIP, this assumes that the combination of states’ annual CHIP allotments and available redistribution funds will be enough to support this additional federal spending in each state.