Medicaid Programs in 24 States To Receive Less Funding Than Expected

Twenty-four states will receive less federal Medicaid funding than they had expected for the first six months of 2011, leaving them with combined program deficits of $1.74 billion, according to a report released on Wednesday by the Council of State Governments, HealthLeaders Media reports.

As a result, the states now must reduce overall Medicaid spending or seek additional funds elsewhere, according to the report (Commins, HealthLeaders Media, 10/20).

Federal Funding

The 2009 federal economic stimulus package provided states with $87 billion in extra Medicaid funding, which was scheduled to expire in December 2010.

Before Congress approved and President Obama signed an extension (HR 1586) of the additional Medicaid assistance, many states estimated that they would receive a similar level of funding as the stimulus package had afforded (California Healthline, 8/11). Ultimately, Congress approved $14.15 billion in additional Medicaid funding for six months -- less than states expected (HealthLeaders Media, 10/20).

HR 1586 extended additional payments through June 2010 on a sliding scale, starting with a 3.2% increase over the first three months of 2011 and a 1.2% increase in the next three months (California Healthline, 8/11).

Because Congress approved the aid package with a lower percentage rate than the 24 states had assumed, they now have to reduce overall spending for their Medicaid programs or seek additional state matching funds elsewhere, according to the report.

California, Other States Receive Medicaid Windfall; Effect Could Be Short-Lived

California is among the states that did not factor additional federal Medicaid funds into its budget, according to HealthLeaders Media. Such states now have an estimated $7.3 billion in additional federal funds, which includes $1.88 billion for California.

States can use the additional funding to shift state allocations for Medicaid to other priorities, or to draw down additional federal matching dollars for Medicaid, HealthLeaders Media reports.

The report notes that although some states might receive relief in the short term, Medicaid enrollment trends and rising costs of care will begin to put new pressures on states' spending and continue to strain their budgets.

Most states have reported that new enrollments into their Medicaid programs are exceeding expectations, raising the likelihood that they will face Medicaid budget deficits by end of the 2011 fiscal year, according to HealthLeaders Media.

Debra Miller -- CSG's director of health policy and a co-author of the report -- said, "The federal match for Medicaid may be a good deal for states -- but states still have to come up with their share," adding, "In today's lean times, that is difficult and the states that counted on a larger match are digging into other state programs" (HealthLeaders Media, 10/20).