Why The Federal Government Must Increase The Medicaid Matching Rate To The States

June 30th — today — is the day the enhanced federal match for Medicaid funding that was included in the 2009 stimulus package (and extended in late 2010) expires, leaving “states struggling to sustain health care’s safety net,” Judy Feder and John Halahan remind us in this Kaiser Health News column. The problem with the current Medicaid structure is that it’s counter cyclical: the rolls swell when the economy turns south and people lose their jobs. But at that point states can’t afford to expand their programs because tax revenues have also declined. Currently, Medicaid enrollment still remains high and “states’ revenues are not back to their prerecession levels.”

So what to do? Feder and Halahan propose extending the increased federal match — when states need it most — and asking them to pay back the loan once the economy recovers. Otherwise, state programs will take a hit and the economic activity that resulted from additional spending on health care services (and all the purchases that supported) will come to a standstill.

The Council On State Governments estimates that for 20 states, the Medicaid match rate in the 2012 fiscal year will actually be lower than the pre-recession rate in the 2008 fiscal year. Seventeen states will experience a rate increase (although the rates will still fall below the enhanced rates provided by federal stimulus funds) and 13 and the District of Columbia will have the same match rates in 2012 as they did in 2008. Here are the states that will likely experience the largest Medicaid cuts and adverse economic consequences if the increased federal contribution is not sustained: