The States’ Medicaid Burden

Among the most contentious questions facing Senate Finance Committee members this week revolves around how much flexibility the states should have to set their own Medicaid eligibility under the Democrats’ sweeping health reform proposal. While it’s often discussed that the bill, written by Finance Chairman Max Baucus (D-Mont.), would open Medicaid coverage to most everyone earning less than 133 of poverty, less frequently mentioned is that a number of states already cover folks earning well above that level. Maine, for example, covers parents up to 206 percent of poverty.

The topic is controversial because the Baucus bill would also require states to maintain their current Medicaid eligibility levels until the start of 2013 (when the state exchanges are expected to be up and running), at which time those folks would, at least in theory, have other affordable coverage options. For Medicaid beneficiaries earning less than 133 percent of poverty, the maintenance of coverage rule would extend an additional year.

It’s not the first time states have been asked to keep Medicaid eligibility steady. The economic stimulus bill, signed by President Obama in February, also included a provision forcing states to maintain eligibility levels. But that bill also included $87 billion in extra federal funding to help states meet the request. That increase in funding, however, runs dry at the end of 2010, leaving states wondering how they’ll comply with the Baucus mandate without the additional funds. Exacerbating the problem, Medicaid enrollment has jumped, as a result of the recession, at the same time that state revenues have fallen for the same reason. Indeed, the Kaiser Family Foundation released a report today revealing that average state Medicaid enrollment grew by 5.4 percent over the past year — the highest jump in six years.

Wary of the problem, several members of the Finance Committee have offered legislation allowing states to lower Medicaid eligibility after the stimulus funding expires at the end of 2010. “The goal is to preserve coverage in Medicaid until states are ready to expand,” Sen. Charles Grassley (R-Iowa), one of the sponsors, said Wednesday night.

Sen. Olympia Snowe (R-Maine), another sponsor of the amendment, said the Baucus bill would punish those states that have taken it upon themselves to help more low-income residents by expanding Medicaid coverage during more lucrative times. Her proposal, she added, would simply allow states to “tailor their programs in the event that circumstances require it.”

The Baucus bill, added Sen. Mike Crapo (R-Idaho), “ignores the budget realities that we are facing in the states.”

Not everyone is on board. Sen. Jay Rockefeller (D-W.Va.), who represents one of country’s poorer states, said lawmakers should do everything they can to preserve coverage, particularly for the poorest folks still suffering from the economic downturn. Congress, he said, has a “proclivity to really have at it when it comes to poor people, people on Medicaid.”

Sensing a tough vote, Baucus tabled the amendment for a later date (i.e. today). He might be leaving time to work on yet another proposal, sponsored by Sen. Maria Cantwell (D-Wash.), to create yet another insurance option covering folks up to 200 percent of poverty. That would help states cover part of their Medicaid population with federal subsidies, rather than state funds.

Baucus is still aiming to finish this process today, so we could learn very shortly what his strategy is.