Senior Research Analyst
Update, May 15: we’ve updated this post to reflect amendments to the legislation.
House Speaker Nancy Pelosi’s coronavirus relief bill provides a much-needed Medicaid funding boost to help states preserve health coverage and address massive state budget shortfalls stemming from the public health and economic crises.
The Families First Coronavirus Response Act, enacted in March, boosted the federal Medicaid matching rate for Medicaid spending (known as the federal medical assistance percentage, or FMAP) by 6.2 percentage points from January 1, 2020 until the Secretary of Health and Human Services ends the official public health emergency. The Pelosi bill — the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act — would maintain that increase at least through June 30, 2021 and raise states’ FMAPs by another 7.8 percentage points beginning July 1, for a total increase of 14 percentage points from July 1, 2020 through June 30, 2021.
Combined with the FMAP increase provided by Families First, the FMAP increase in the HEROES Act would give states at least $117 billion (and likely more) through June of 2021, the end of the 2021 fiscal year in most states.
States would receive about $63 billion over 18 months from the 6.2 percentage-point increase and another $54 billion over 12 months from the additional 7.8 percentage-point increase. (See the table for our rough preliminary estimates of each state’s potential funding, based on Urban Institute estimates of 2020 state Medicaid spending eligible for the higher match rates. Many states’ actual funding would be different from these projections, since the Urban figures forecast states’ 2020 spending based on prior-year data.)
States’ total FMAP funding increases would likely exceed our estimates, since our estimates don’t account for the almost certain growth in Medicaid enrollment as unemployment continues rising or for the possible continuation of the public health emergency (and thus the Families First FMAP increase) beyond June 2021, as the Congressional Budget Office expects.
Medicaid is central to the health care system’s response to the public health and economic crises. Millions more people will likely enroll in the coming months due to the deep economic downturn, the large majority of whom would otherwise become uninsured. State Medicaid programs also are incurring other costs due to COVID-19, including new investments to protect enrollees and help doctors, hospitals, and other providers respond to the crisis.
The added need for Medicaid coverage and the strain on Medicaid’s finances coincide with an unprecedented state budget crisis. In past budget crises, states have responded in part by cutting Medicaid benefits or payments to providers to help comply with their balanced budget requirements. Such cuts would be especially damaging during the public health emergency, since they could prevent people from getting tested and treated for COVID-19, compound the challenges currently facing health providers, and make it harder for seniors and people with disabilities to access services needed to remain in their homes, where they likely face less risk of getting the virus than in nursing homes.
The HEROES Act’s FMAP increase and other assistance for states would help states address their budget shortfalls by providing timely, flexible funding that they can use to avoid cuts to a range of services. The FMAP increase, in particular, would help preserve health coverage and access to care. By reducing states’ costs per dollar of Medicaid spending, FMAP increases discourage cuts and encourage Medicaid investments to respond to the crisis. In addition, like Families First and FMAP increases in response to prior recessions, the HEROES Act also includes maintenance-of-effort protections that prohibit states that accept the funds from restricting Medicaid eligibility.
Policymakers should quickly enact the HEROES Act FMAP increase, helping states avoid health care cuts and better respond to the public health and economic crises.
|Preliminary Estimates of Increase in Federal Funding from FMAP Increase Under Enacted and Proposed Legislation|
Assumes increase is in effect Jan. 1, 2020 - Jun. 30, 2021
|Additional federal funding due to increase (in $millions)|
|State||+6.2% point FMAP increase (Jan 2020 - Jun 2021, 18 months)||+7.8% point FMAP increase (Jul 2020 - Jun 2021, 12 months)||Total (Jan 2020 - Jun 2021, 18 months)|
|District of Columbia||300||250||550|
Source: CBPP analysis using Urban Institute estimates of Medicaid spending (2020), 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.
For fiscal year 2021 expenditures, we inflate 2020 total traditional (non-expansion group) Medicaid spending from the Urban Institute using CBO's baseline estimates. We assume the federal share of all traditional Medicaid spending is increased by 6.2 percentage points in each state from January 1, 2020 through June 30, 2020 and increased by 14.0 percentage points from July 1, 2020 through June 30, 2021. We do not account for differences in the federal matching rate for various services in traditional Medicaid, or for the likely growth in Medicaid enrollment due to 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 and Medicare Part D prescription drug expenditures for low-income adults. In general, the 14.0 percentage-point FMAP increase will lead to a 9.8 percentage-point increase in the federal share of CHIP costs and a 10.5 percentage-point increase in the federal share of Part D costs. To project these funding increases, we inflate 2017 CHIP spending to 2020 and 2021 using CMS’ cost growth projections for CHIP and inflate 2018 Medicare Part D prescription drug payments for low-income adults by CBO’s Medicare baseline estimates. Note that for CHIP, we assume the combination of states’ annual CHIP allotments and available redistribution funds will be enough to support this additional federal spending in each state.