CBO Chief Says Increasing Federal Medicaid Funding Could Help Stimulate U.S. Economy, Impact Would Vary by State
Congressional Budget Office Director Peter Orszag on Tuesday during a Senate Finance Committee hearing said temporarily increasing the federal medical assistance percentage for Medicaid likely would help stimulate the economy, but the impact would vary by state, CQ HealthBeat reports. Congressional Democrats might push for inclusion of a temporary increase to the FMAP in an economic stimulus package. A 2.9-percentage-point FMAP increase was included in a 2003 stimulus package, which lasted for five calendar quarters and boosted federal Medicaid outlays over that period by $10 billion, according to Orszag.Orszag said, "Additional federal aid to states that are facing fiscal pressures or are already in recession would probably stimulate the economy," adding, "However, federal aid to states whose budgets are relatively healthy may provide little stimulus, especially if those states use the aid to build up their 'rainy-day' funds instead of increasing spending or reducing taxes." He added that when states experience falling revenues because of an economic downturn, they cannot freely borrow money to cover the costs of their programs, and instead must cut spending or increase taxes.
He said, "Consequently, the behavior of state and local governments often serves to reduce aggregate demand further," adding that in 2003, "more than half of the states reported that the increased matching rates enabled them to avoid or delay making cuts -- or to make smaller cuts -- to their Medicaid program." CBO recently gave increasing federal assistance to the states a "medium rating" based on cost-effectiveness in boosting economic demand to counter a recession.
According to CQ HealthBeat, "Support for FMAP increases appears to be developing largely, but certainly not wholly, along party lines." It is unclear whether Medicaid provisions would be included in an economic stimulus bill (Reichard, CQ HealthBeat, 1/22). Talks between House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader John Boehner (R-Ohio) are focusing on the size of proposed rebates, as well as the Democrats' call for increases in Medicaid, food stamp and unemployment benefit payments, among other issues (Taylor, AP/Foster's Daily Democrat, 1/22).
NGA
Governors "on a bipartisan basis" also are calling for FMAP increases amid projections of declining state revenues, CQ HealthBeat reports. The National Governors Association in its guidelines for a stimulus package said that 17 states have projected deficits in fiscal year 2008 totaling more than $14 billion, and 15 states have projected deficits totaling $30 billion in FY 2009. According to NGA, this fiscal year, FMAPs declined in 20 states and are expected to be reduced in 17 states in FY 2009. NGA said that blocking the cuts and temporarily increasing all states' FMAPs would prevent Medicaid cuts amid anecdotal evidence that enrollment in the program is increasing, according to CQ HealthBeat.
Congressional Priorities
A recession could threaten access to health care and serve as the catalyst for a comprehensive health care system overhaul, according to Brian Biles, a George Washington University health policy professor and former assistant secretary of HHS under President Clinton. Biles spoke at a forum on Friday sponsored by the Alliance for Health Reform and the Robert Wood Johnson Foundation that examined lessons from the attempt to overhaul health care in the 1990s. Biles said that "in the U.S., where health care is employment-based and when people lose jobs they lose health care, with a recession ... could come the commitment to do something about it."
According to CQ HealthBeat, panelists said that a health system overhaul "would have to top the congressional agenda and require a singular dedication from the president." In addition, the panelists said lawmakers should aim to simplify proposals and resolve details after legislation is enacted, as well as work to pass legislation in the beginning of the congressional session, CQ HealthBeat reports (Webber, CQ HealthBeat, 1/22).
A webcast of the forum is available online at kaisernetwork.org.
Editorial
"For special interests, the stimulus bill is an irresistible opportunity to grab some taxpayer money," and although the "president and congressional leaders have agreed to do something," the "question is what," a USA Today editorial states. The editorial continues, "Lobbyists have no shortage of ideas," including sending "billions more to states to help them shore up their Medicaid funds." According to USA Today, "Not all of these are necessarily bad ideas, but they should be considered on their own merits and not be tossed willy-nilly onto the stimulus package." The editorial continues, "Encouragingly, both sides seem to have subscribed to the mantra that any stimulus bill be 'timely, temporary and targeted.' That argues for quick, simple, one-time tax rebates for individuals and short-term investment incentives for business" (USA Today, 1/22).
