State Budgets

Another Reason States Should Be Wary of Medicaid Expansion

Missouri may be paying less for its Medicaid program next year, but it’s for all the wrong reasons… maybe.

The St. Louis Post Dispatch reports that the state will receive an increase for its Medicaid reimbursement, the largest percentage increase in the nation. Most likely, Missouri’s faltering economy is the cause. Or it might not be–no one really knows the exact reason for the alteration of the funding amount.

“I don’t know whether to be glad or sad,” quipped state Sen. Rob Schaaf, a physician and a Republican from St. Joseph.

In fact, the complex federal formula makes it hard to make any sweeping statements. State budget officials and health care economists said Monday that they were still puzzling over reasons for the shift.

The Federal Medical Assistance Percentage (FMAP) is the percentage of funding that the federal government will cover towards the cost of a state’s Medicaid program. The federal government calculates FMAP using a formula that includes the state’s per capita personal income in relation to the national average. The lower the per capita income, the higher the FMAP.

States must deal with an adjustment in the FMAP year after year but they have no good way of predicting what the number might be.

This uncertainty exposes a flaw in the state/federal Medicaid partnership, a problem that will be exacerbated if states agree to expand Medicaid.

The Supreme Court granted states the opportunity to bow out of Medicaid expansion because the change was so radical. But the justices did not permit states to leave the program for the types of adjustments that Missouri is getting. Of course, the Show-Me State has no complaints now, but if the FMAP adjustment meant less money for Missouri, officials would obviously protest. Just ask the people of Nebraska, who lost out on Medicaid funding thanks to an economic boon.

Rather than recognize this perennial uncertainty, half of all states have now willingly decided to put a large portion of their budget planning into the hands of the federal government. States think that the reimbursement rate offered by the federal government is a good deal–100 percent now, and 90 percent in 2020 and beyond. The biggest problem is that even if the rates never change (which seems unlikely), states have no idea what that total cost will actually be.

Would you commit to splitting the dinner bill with your “generous” friend before you know where you’ll be dining and how much he’ll be ordering? It’s a great deal to only pay 10 percent of the bill–but that 10 percent at the local diner looks a lot different than 10 percent at Morton’s Steakhouse. And what if that friend has been known to pick pricey places, just as the federal government has been known to change up funding amounts?

If states have learned anything from Medicaid expansions in the past, states need to get Medicaid spending under control before they decide to take a blind leap into expansion, and they need to have plans in place for dealing with the financial uncertainty that comes with expansion.

In Depth: State Budgets

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