On December 31st of this year, enhancements made to the Medicaid FMAP (Federal matching dollars) via the ARRA (Stimulus or American Recovery and Reinvestment Act) are set to evaporate. In a series of bills and other legislative initiatives throughout the spring and early summer, Congress has failed to extend funding to prevent the evaporation of the additional FMAP funding. See my related posts from my blog below for more information on Medicaid, the FMAP provisions, and the legislative activity to extend the enhanced match provided under the ARRA.

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Yesterday, on a procedural vote to end debate in the Senate, another version of a "jobs" bill containing a slimmed down extension of the enhanced FMAP crept forward. The vote to end debate and send the bill forward for a final vote was 61-38. With such a definitive margin in support of a vote, it is all but certain the bill will pass on a final vote. The measure then must go to the House, presently in recess, where it will be either voted upon "as is" or modified and returned to the Senate. Speaker Pelosi has indicated that she will call the House back to session in order to produce a final bill for President Obama's signature, prior to the re-opening of schools in late August/early September.

The bill provides $26 billion in additional funding with $10 billion targeted toward education and public service employment and $16 billion for extension of the enhanced FMAP. The $10 billion is designed to prevent the lay-offs of teachers, firefighters, police and other municipal service worker jobs that are purportedly "at-risk" once continued funding provided in the ARRA evaporates. Communities, states, and civil service employee unions have been pressuring Congress to extend some levels of Stimulus funding, claiming that without additional dollars, budget cuts would cause lay-offs of key positions such as teachers. Republicans have effectively stalled previous legislative attempts to extend additional funding claiming that the dollars will add to the deficit and are effectively federal bail-outs for the teacher's union and other municipal service employee unions. In this round, Senate Majority Leader Reid brought forth additional cuts in other programs plus tax increases to generate a revenue offset to the new spending. The resultant funding shift caused Republicans Snowe and Collins to vote in favor of ending debate (a show of support for the bill).

The $16 billion targeted toward additional Medicaid funding was heavily lobbied for by states and health care trade associations as critical to prevent reimbursement cuts and benefit reductions for seniors, the poor and the disabled. With 48 out of 50 states having moderate to severe budget deficits and current Medicaid structural deficits, loss of the enhanced match would necessitate programmatic cuts. In some cases, states that were in a July 1 fiscal year budget process and/or December 31 fiscal year budget process already installed programmatic cuts and reimbursement changes as the timing of their budgets required an assumption of lost Medicaid funding coming at the end of the year.

While the probability of an extension to the additional FMAP provided under the ARRA appears strong, the House must still approve the bill prior to the funding becoming an actuality. The timing will clearly assist most states but in some cases, a portion of the cuts already enacted in certain states will remain. Additionally, the added funding is not without an early 2011 sunset date or in other words, the $16 billion is only a temporary "stay" of execution for state Medicaid budget problems. In all likelihood, unless Congress consistently re-ups with more funding for continued FMAP support, states will need to significantly restructure their Medicaid programs over the next twelve to eighteen months in order to maintain basic solvency. With the economy still in a very slow recovery mode, most states won't see economic growth and resulting revenues from taxes sufficient over the next year to avoid cuts in their Medicaid programs.