June 7, 2010
Illinois and many other states drafted budget plans for FY2011 based on the assumption that Congress would extend the expiration date for enhanced federal Medicaid funding by six months—from December 31, 2010 to June 30, 2011. Now that assumption is looking increasingly shaky, adding to concerns about mounting state budget deficits.
Just before the Memorial Day weekend, the U.S. House of Representatives eliminated the Medicaid extension provision from a jobs bill before passing the proposed legislation. The bill, HR 4213, was passed by the U.S. Senate in March of 2010 with the Medicaid measure included. The National Conference of State Legislatures (NCSL) said the House deleted the provision because of pressures to reduce the total cost of the bill, estimated at just over $100 billion.
According to NCSL, there are 30 states with either proposed or enacted budgets for FY2011 that are based on an extension of federal Medicaid funding under the American Recovery and Reinvestment Act of 2009 (ARRA). The extension would generate a total of $25.5 billion for all states, NCSL said.
In Illinois, FY2011 projected General Funds revenues of $27.4 billion include roughly $450 million due to the extension of ARRA funding, according to the Governor’s Office of Management and Budget. General Funds support the regular operating and administrative expenses of most state agencies and are the funds over which the State has the most control and discretion.
As discussed previously in this blog, the State would end FY2011 with a total deficit of nearly $9 billion under the budget passed by the General Assembly in May of 2010. The lack of additional Medicaid funding could add to that budget gap.
Medicaid is a health insurance program for the poor that is jointly funded by federal and state governments. States pay for medical services obtained by Medicaid recipients; the federal government then reimburses the states for a certain percentage of those expenditures. The federal reimbursement rate was enhanced under ARRA for 27 months, from October of 2008 through December of 2010. In Illinois, the reimbursement rate has risen from 50.32% before ARRA to a current rate of 61.88%.
On April 22, 2010, at a budget hearing in Springfield before an Illinois House Appropriations Committee, a committee member asked whether the State had developed a plan to reduce Medicaid spending in case Congress did not approve additional funding for the program. Julie Hamos, the Director of the Illinois Department of Healthcare and Family Services, said the State did not have an alternative plan.
NCSL sent a letter to Senate leaders on June 3, 2010, urging that the federal funding be extended. “The Medicaid program remains a critical component of state efforts to provide assistance to individuals and families who have lost jobs and health insurance,” the letter said.