House lawmakers, already more than a week into their August recess, are returning to Capitol Hill to act on a proposal providing states with $16 billion in extra federal Medicaid assistance. The vote, scheduled for Tuesday, comes after Senate Democrats unexpectedly passed a state aid package last week, which also includes $10 billion to preserve teaching jobs.

Extra Medicaid Funds Began With Stimulus 

With states facing a recession double-whammy of less revenue and more demand for health care services, Congress included extra money to Medicaid programs in the February 2009 federal stimulus package. Before the stimulus, the federal government’s share of Medicaid costs was between 50 and 76 percent (depending on the per capita income of the state). The federal match increased to between 61 and 84 percent of all Medicaid spending. The higher matching rate was originally slated to expire at the end of 2010, but an early version of the jobs bill extended the funding another six months, at a cost of $24 billion.

Because officials were convinced the money was imminent, 29 states factored the extra money into their budgets for the fiscal year that ends June 30, 2011.

While elected officials, hospital groups and organizations like the AARP pushed hard for the six month extension, concerns about deficit spending kept the measure from being approved. It was stripped from the House-passed bill in late May. Democrats inserted it in the Senate version, but it failed to pass – three times. In June, Democratic leaders unsuccessfully floated a compromise approach that would have phased out the enhanced funding over six months.

Sen. Scott Brown, R-Mass., introduced a stand-alone bill that would offset the cost of the higher matching rate using stimulus funds, but Democrats opposed his approach, maintaining those funds are needed to support other jobs programs.

Governors from both parties argue that the current funding level is critical. Without it, they say they will face budgetary crises that will trigger state employee lay-offs and deep program cuts. Some states – including Michigan and Idaho – are considering revisiting their budgets or tapping into reserve funds to cover the gap, according to a report by the National Conference of State Legislatures, which endorses an extension of the enhanced Medicaid match.

COBRA Subsidy: Missing From Jobs Bill 

Meanwhile, the prospects for action on what was once another Democratic health care priority are dimming. The COBRA subsidy provided newly laid-off workers with a 65 percent subsidy to help them stay on their former employer’s health plan. 

This assistance was also authorized in last year’s stimulus bill and was extended three times, through the end of May, but now, workers laid off after June 1 aren’t eligible. They still have the right to stay on their former employer’s health insurance plan for up to 18 months, but they must now pay the entire cost of the premium, an expense that is often prohibitive.

A new extension of the subsidy was initially included in the House jobs bill; but because of budgetary and political pressures conservative Democrats and Republicans forced the leaders to jettison it. The provision was never in the Senate bill.

On June 24, Speaker of the House Nancy Pelosi said “I am hard put to pass any more initiatives here unless there is some reasonable prospect of success on the Senate side.”

Sens. Bob Casey, D-Penn., and Sherrod Brown, D-Ohio, are attempting to advance the COBRA subsidy as a separate piece of legislation and would pay for it by eliminating a tax break. Under their plan, the COBRA assistance would be retroactive, giving people laid off since June 1 six months of the federal subsidy instead of the 15 months that the earlier law provided.

In late June, Brown said that while the economy is showing signs of improvement, many workers don’t have access to affordable COBRA coverage. According to a spokeswoman from his office, he remains hopeful that some type of extension will pass this year, though she wasn’t sure exactly what it might include. “With the Senate schedule still so in flux we’ll just be looking at any potential opportunity to move it. But nothing’s been nailed down yet,” she said.