From Crunch to Crisis: State Budgets, Medicaid and the Economy

1. From Crunch to Crisis: State Budgets, Medicaid and the Economy Robin Rudowitz Associate Director Kaiser Commission on Medicaid and the Uninsured for Alliance for Health Reform Washington, DC February 22, 2010

2. Medicaid Today Health Insurance Coverage 29.5 million children & 15 million adults in low-income families; 14 million elderly and persons with disabilities Assistance to Medicare Beneficiaries 8.8 million aged and disabled — 19% of Medicare beneficiaries Long-Term Care Assistance 1 million nursing home residents; 2.8 million community-based residents MEDICAID Support for Health Care System and Safety-net 16% of national health spending; 41% of long-term care services State Capacity for Health Coverage Federal share ranges 50% to 76%; 42% of all federal funds to states

3. SOURCE: Bureau of Labor Statistics States with Unemployment Rates At Various Levels in December 2008 and December 2009 Number of States Unemployment Rate December 2008 December 2009

4. State Tax Revenue, 1999-2009 15.9% -11.0% -9.4% 3 Quarters of Double Digit Revenue Loss in 2009 -15.6% SOURCE: Percent change in quarterly state tax revenue, US Census Bureau

5. Impact of a 1% Point Increase in Unemployment on State Revenues, Medicaid, CHIP & Uninsured 1.1 1.0 = 1% & Decrease in State Revenues Increase in National Unemployment Rate Increase in Medicaid and CHIP Enrollment (million) Increase in Uninsured (million) 3-4% SOURCE: John Holahan and Bowen Garrett, Rising Unemployment, Medicaid, and the Uninsured, prepared for the Kaiser Commission on Medicaid and the Uninsured, January 2009.

6. Trying to Respond: ARRA Medicaid Provisions • Temporary increase in Medicaid FMAP • Estimated $87 billion in Federal Funds • Relief for 10/1/08 – 12/31/10 • 3 Components • Hold harmless • Base increase 6.2% • Additional relief for states with high increases in unemployment • States cannot restrict eligibility or standards and must comply with prompt pay requirement

7. How States Used ARRA Enhanced Medicaid Funding in FY 2009 SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, September 2009.

8. Medicaid is an Economic Engine in State Economies Federal Medicaid Matching Dollars —Injection of New Money— State Medicaid Dollars Direct Effects Health Care Services Vendors (ex. Medical Supply Firm) Indirect Effects JOBS Employee Income Induced Effects Consumer Goods and Services Taxes

9. SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, September 2008 and September 2009. Enrollment data updated to reflect most recent June to June Enrollment Data from KCMU and HMA. Total Medicaid Spending and Enrollment Growth By the end of 2009, 44 states said spending and enrollment projections for FY 2010 were too low

10. NOTE: Past survey results indicate not all adopted actions are implemented. Provider payment restrictions include rate cuts for any provider or freezes for nursing facilities or hospitals. Eligibility includes eligibility and application expansions/restrictions. SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, September 2009. States Imposing Policy Restrictions SFY 2008-2010 Number of States

11. Outlook • Budget pressures for states and individuals will persist even when the economy starts to recover • States struggling to maintain current programs, but • Cuts to providers and benefits on the table to meet mid-year shortfalls for FY 2010 • Expiration of the ARRA funds mid-way through state FY 2011 could result in deeper cuts to providers and benefits and eligibility cuts • Budget driven cutbacks in Medicaid may jeopardize Medicaid’s role as a strong coverage program for low-income individuals