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Monday, February 1, 2010

President Obama's Budget Would Provide Millions for Maryland

President Obama is receiving heated criticism over his proposed $3.83 trillion budget for fiscal year 2011. Critics have seized on the fact that the budget would add $5.08 trillion in deficits over the next five years an amount that is $1.32 trillion, or 35%, more than the White House predicted just 12 months ago. Lost in the discussion of the budget proposal, however, is the inclusion of some much needed relief for states and an especially important bit of help for Maryland. The President’s budget includes nearly $25 billion in supplemental Medicaid funding for states via a temporary boost to the share of program costs paid by the federal government. The so-called Federal Medical Assistance Percentages, or FMAPs, determine the share of Medicaid costs paid by Washington and all states receive at least a 50% match on dollars spent. Although Medicaid is jointly funded by states and the federal government it is an expensive program and in many states represents the largest slice of the budget pie – averaging about 22% of a typical state’s budget. Medicaid participation is very responsive to changes in the economy and the recent economic downturn has caused state Medicaid enrollment to swell. A study by the Kaiser Commission on Medicaid determined that each 1 percentage point increase in the national unemployment rate translates into one million additional Medicaid participants and state revenue declines of 3 to 4%. It was estimated that nearly 5 million Americans had enrolled in Medicaid since the start of the recession.

To help states defray the cost of this increased demand for Medicaid, Congress included a 6.2% increase in the FMAP as part of the American Recovery and Reinvestment Act past early last year. But that assistance expires on 12/31/2010. Few states expect to experience an economic recovery sufficient to offset the loss of those supplemental funds by then. The House of Representatives had included supplemental Medicaid funding in its version of health reform and more recently included the 6.2% increase in the FMAP in a jobs bill passed in December. The House version of health reform is considered to be dead in light of the special election in Massachusetts that ended the Democrat’s supermajority in the Senate, and the Senate is yet to move on the jobs bill. Many states, Maryland included, were already counting on the receipt of the additional Medicaid funds to avoid making painful cuts in their fiscal 2011 budgets. In an effort to close a nearky $2 billion hole, Maryland Governor Martin O’Malley assumed the receipt of nearly $400 million in supplemental Medicaid funds in the budget that he submitted to the General Assembly on January 20th. The Massachusetts election seemed to put those funds in doubt and state Republican leaders criticized the inclusion of the funds in the governor's budget. But the Presidents budget proposal appears to vindicate O’Malley’s choice to count on the funds. If approved, the 6.2% increase would mean several hundred million additional Medicaid dollars for Maryland in fiscal 2011.