With the current economic downturn and President Bush unveiling his Fiscal Year (FY) 2009 budget freezing Medicaid and Medicare funding, long-term care associations are voicing their approval of bipartisan congressional support to include a temporary increase in state fiscal relief through the Federal Medical Assistance Percentage (FMAP) in any economic stimulus plan. The Congressional “charge” is being led by Senator Jay Rockefeller (D-W.Va.).
Health and Human Services Secretary Mike Leavitt said in news reports that he opposes an increase in FMAP for Medicaid, noting that it could serve as a way to increase federal control over healthcare, something the White House doesn't want to do.
In an effort to help our readers understand the impact of the current funding crisis, Long-Term Living Executive Editor Maureen Hrehocik asked two association insiders, Barbara Gay, director of advocacy information for the American Association of Homes and Services for the Aging (AAHSA) and Cynthia Morton, senior director of congressional affairs for the American Health Care Association (AHCA), to comment on some of the possible ramifications if FMAP is not included in an economic stimulus package.
Hrehocik: What will be the impact on long-term care if FMAP-type financing isn't included in any economic stimulus package?
Morton: As the economy weakens, states will experience a downturn that will decrease tax revenue. Without that tax revenue, states could run significant budget deficits, which will require states to cut spending to offset the decline in revenue and maintain a balanced budget. Healthcare is usually a big target for states looking to cut spending since a state's Medicaid program often represents a large portion of the state budget. Cuts to Medicaid are likely to affect long-term care facilities as the majority of patients/residents rely on Medicaid to pay for their long-term care needs.
Hrehocik: Do you foresee Medicaid long-term care payments shrinking in states hard-hit by the economic downturn?
Gay: Long-term care accounts for approximately 70% of Medicaid spending. If states have to cut their Medicaid programs, long-term care would be the obvious place to make reductions because that sector of the Medicaid program could yield the greatest savings. Especially in an election year, it seems likely that politicians would seek to make cuts that would affect consumers as little as possible, so cutting payments to providers would appear to be the most politically painless way of reducing state Medicaid spending.
Morton: Yes, Medicaid payments for long-term care are likely to shrink in states that are hard-hit by the economic downturn. Some states already expect smaller Medicaid payments from a scheduled decrease in the state's federal medical assistance percentage rate—the amount of matching federal dollars for a state's Medicaid budget—given the lag time related to calculation of the state's FMAP rate.
Hrehocik: What was the impact of the previous FMAP “bonus” in 2003?
Morton: In 2003, the federal government provided $20 billion in fiscal relief to the states, including a $10 billion increase in FMAP rates in response to the post-September 11 economic downturn. The boost to FMAP rates allowed more than half of the states to avoid, delay, or reduce the size of the cuts to their Medicaid program according to a just-released Congressional Budget Office report entitled, Options for Responding to Short-Term Economic Weakness. These findings complement a recent analysis from Dr. Mark Zandi, chief economist for Moody's Economy.com, who examined the effectiveness of the various stimulus options being considered by Congress. Zandi found that targeted state aid such as temporarily boosting FMAP rates would generate increased economic activity approximating $1.36 for each dollar of additional aid as it would reduce state budget cuts which, Zandi said, “are sure to become a substantial drag on the economy later this year and into 2009.”
Hrehocik: Do you see any legislative movement this year toward possibly a new Boren Amendment or relieved pressure on intergovernmental transfers (IGTs)?
Gay: While the 2003 FMAP bonus contained a maintenance-of-effort requirement that prevented states from cutting their Medicaid spending if they took the temporary increase in the federal match, there was no requirement that payments to providers be set at certain levels. Considering the difficulty of getting a temporary FMAP increase through the current Congress, it seems most unlikely that any effort to resurrect Boren-like reimbursement requirements will succeed. Last year, Congress delayed for one year the CMS rule that would eliminate intergovernmental transfers. Unless the moratorium is extended, the rule will go back into effect on May 28. Combined with the slowdown in state revenues due to the recession, the elimination of intergovernmental transfers would have a disastrous impact on state Medicaid programs. We are urging Congress to continue the moratorium on the IGT rule.