A Hidden Stimulus in Health Reform

It’s a nonsensical element of Medicaid’s funding formula that during economic downturns, when state budgets are most squeezed, states are also asked to bear much higher health costs as the Medicaid rolls swell. The result, inevitably, is the erosion of health coverage for the country’s most vulnerable populations.

The $787 billion economic stimulus bill addressed the issue, providing additional federal funding for the state-federal Medicaid program. But that extra help expires at the end of next year, when unemployment rates are expected to remain near double digits. The looming expiration has left state health officials and children’s welfare advocates anxious about the effects on kids’ health care.

Enter the House health reform bill, which would provide more than $23 billion to continue the additional federal funding for six months. The Washington Post explains:

Under the Affordable Health Care for America Act, the federal government would continue to pay a higher share of all Medicaid costs — 66 percent on average, up from 57 percent before the stimulus — for an additional six months, and erase in one fell swoop a major chunk of states’ projected shortfalls for the coming year.

“It would be a huge help — critical,” said Cindi Jones, chief deputy director of Virginia’s Medicaid program, which quickly estimated last week that it would receive an extra $360 million to $380 million next year under the bill. At a meeting last week of the nation’s Medicaid directors, Jones said the group is unanimously in favor of the provision.

That provision isn’t included in the Senate’s health reform bill, but states are hoping that it will work its way into the final bill. Of course, the temporary help is no remedy to the flawed Medicaid funding formula. It’s worth asking when Democratic leaders plan to tackle that larger problem, if not in the context of the most sweeping health reforms since the program was created.