The Heavy Strain
Congress has an opportunity to alleviate the impact of Coronavirus to State budgets
The Coronavirus - and Medicaid - are wreaking havoc to State budgets
Moody's Analytics predict that on average the state general fund revenues are projected to dip by an average of 20 percent in the coming months.
Two things are making it worse:
- The expansion of Medicaid were already strenuous to State budgets before the Coronavirus, and
- Congress is tying States' hands even more during the public health emergency.
States budgets in light of the virus outbreak
States are bracing for massive upticks in Medicaid dependency
As more businesses are forced to close and lay off workers, Medicaid spending will soar even higher than recent record levels. Health economists are projecting that Medicaid enrollment could rise by as many as 23 million people—a 32 percent increase. But actual enrollment could end up even higher. Arkansas, for example, predicts enrollment in its Medicaid expansion will grow by 100,000 enrollees by August 2020, with other Medicaid categories growing as well. Medicaid applications have already increased by nearly 50 percent in Utah year over year, while applications have increased tenfold in Nevada in just one month. But while it may be easy to blame the imminent crisis on COVID-19, in reality, these problems have been building over the long term. Spending and enrollment have skyrocketed by more than 50 percent in the last decade alone—all during a period of record economic expansion. By 2018, before COVID-19 even existed, nearly 74 million individuals were dependent on Medicaid, a record high. Taxpayers also spent a record $616 billion on the program. Much of this growth has been driven by the rapid addition of able-bodied adults to the program. Medicaid has wreaked havoc on state budgets for years, crowding out other important state priorities like education, infrastructure, and public safety. Indeed, nearly one of every three dollars states now spend is consumed by Medicaid. And even absent the COVID-19 crisis, Medicaid was projected to continue growing significantly over the coming years. Actuaries at the U.S. Department of Health and Human Services estimated Medicaid expenditures would grow by more than 70 percent over the next 10 years, far outpacing economic growth, and ultimately soaring beyond $1 trillion per year. If the already unstable program and a massive increase from an economic downturn were not bad enough, Congress has made the outlook even worse.
Congress has made the outlook even worse by tying states’ hands
In a scramble to help states deal with an influx of Medicaid enrollment, Congress passed the Families First Coronavirus Response Act (FFCRA) in March 2020. The package offered states increased Medicaid funding to help weather the crisis, but prohibited states from removing ineligible enrollees—including those committing welfare fraud—from their programs in order to receive the extra money. In short, Congress forced states to choose between receiving much-needed relief and protecting Medicaid funding for the truly vulnerable. Even worse, the enhanced funding is a drop in the bucket towards what states will need to cover increased Medicaid costs—not only because of increased enrollment due to the economic downturn, but also because they will be forced to continue providing benefits to ineligible enrollees.
Congress has a chance to get this right
As Congress continues to debate and pass additional legislation to address the COVID-19 fallout, it has an opportunity to cut the strings that are tying states’ hands. States should not have to choose between much-needed federal funding and the integrity of their Medicaid programs. Congress can—and should—rectify this situation by granting states the needed flexibility to manage their Medicaid programs.
Credits:
Jonathan Ingram and Nicholas Horton of the Foundation for Government Accountability co-authored the contents used for this post and visual analytics.
References: