New data confirm states need more federal Medicaid support

Betsy Hammer
Aug 03, 2020

What does a global pandemic plus a severe economic recession equal? More people who need affordable health care. We’re seeing data that clearly shows climbing numbers of Minnesotans needing some help to afford care while we’re also seeing massive state revenue shortfalls as a result of the pandemic’s economic disruption. This presents a serious mismatch of needs and resources. An increase to federal Medicaid funding is needed to make sure people can get the health care they need, when they need it. 

Here in Minnesota, the number of people enrolling in Medicaid managed care increased 13.6 percent between February and July 2020. That’s nearly 124,000 more Minnesota friends and neighbors who have turned to Medical Assistance (Minnesota’s name for Medicaid) for health care during these difficult times.  

Medicaid is working the way it is supposed to – expanding as the economy falters, since folks lose their jobs and their incomes fall low enough to qualify for assistance. The very fact that we are living through a global pandemic underscores the need for maintaining access to medical care.  

At the same time, state budgets are facing dramatic revenue losses as a result of the recession. In Minnesota, we face a more than $2 billion shortfall in the current state budget cycle and a much larger $4.7 billion shortfall in the next. Because they have to balance their budgets, in a recession, states face the double-whammy of more people needing a helping hand at the same time that they have fewer resources. 

The best tool to tackle this conundrum? As it has in the past, the federal government should shoulder more of the responsibility for funding essential services and preventing the further job loss and drag on the economy that state budget cuts would create. One way it does that is through increasing the FMAP -- a wonky but incredible piece of policy (click here for a recent explainer). The FMAP, or Federal Assistance Matching Percentage, is the federal government’s share of funding for Medicaid; boosting that rate is a tried-and-true approach to protecting access to essential health care and avoiding painful budget cuts.

In March, the federal Families First Act included a 6.2 percent increase in the FMAP, which is a great start but well below the kinds of FMAP increases implemented during the Great Recession. We need a larger boost to the federal share of Medicaid funding, and the boosted FMAP rate must last the full duration of the economic downturn; folks will continue to need Medicaid as long as unemployment is high and jobs with benefits are scarce.  

The alternatives to adequate federal Medicaid funding are bad outcomes that make it harder for people to get the care they need and for health care providers to serve their communities. Some states with more immediate budget-balancing requirements than Minnesota saw that recent FMAP boost did not go far enough; now, these states have implemented harmful cuts to Medicaid, making it harder for people to qualify, including cutting provider reimbursements, reversing planned coverage improvements, and furloughing workers who help connect people to health care coverage.

As more Minnesotans turn to Medical Assistance, it’s clear that the system is working as it should: people who lose their incomes during an economic downturn are able to afford medical care to keep themselves and their communities healthy. It’s time for the federal government to step up its support of Medicaid by increasing the FMAP so that states can continue to make affordable health care work for all who need it, while protecting other essential state services.