CPWD Update

Stimulus Package and Medicaid Services

Questions and Answers about the Stimulus Act and Medicaid.

2/23/2009

By: Steve Gold

Based on the previous Information Bulletin "The Stimulus Act, Medicaid Services," some advocates asked similar questions regarding Stimulus package's $87 billion increase in Medicaid funds. Here are a few of them:

1. Could a state reduce its Medicaid services and then use the increased FMAP to bring the level of services back to the level they were before the reduction? For example, if a state were spending $100 million on a Medicaid waiver or Medicaid durable medical equipment, and assume the existing match is 60% federal and 40% state funds, could a state reduce the $40 million of state funds to $35 and then use the increased stimulus FMAP match (which could be increased to 63.9%) to bring the entire program back to $100?

No. Section 5001(f)(1)(A) sets July 1, 2008 as the benchmark. A state is NOT eligible to receive the increased FMAP under the Stimulus package if its "eligibility standards, methodologies, or procedures under its State [Medicaid] plan ... are more restrictive [than] under such plan (or waiver) as in effect on July 1, 2008."

July 1, 2008 is the benchmark on top of which the Stimulus' increased FMAP will work. If your State's Medicaid plan on July 1, 2008 had "eligibility standards, methodologies, or procedures" which cost $40 million in state funds, your state must keep those in effect - IF it wants to receive the increased FMAP.

This is a "stimulus" act b not a "take the extra federal money and run," or "reduce the state expenditures and wind up at the same spot" act. The answer is the same whether or not your state wants to "replace" the federal funds or "reduce" the state share.

2. Could a state take some of its state Medicaid funds and, because it will receive an increased FMAP, use the state funds for roads? Or, could a state take the increased FMAP and put it in a Medicaid reserve fund?

No. Section 5001(f)(3) provides that a state is NOT eligible for increased FMAP "if any amounts attributable (directly or indirectly) to such increase [i.e., in the FMAP] are deposited or credited into any reserve or rainy day fund of the State."

While it is unclear what Congress meant by a "reserve" fund, it is clear that

Congress intended that the increased federal Medicaid match, together with the July 1, 2008 state program and funds, be used immediately for a stimulus in the Medicaid program. A state cannot (legally) allocate, deposit, or redirect its state or federal Medicaid funds away from the Medicaid programs' payment for and delivery of actual Medicaid services because it will receive increased FMAP.

Any budgetary changes "attributable" even "indirectly" to the increased FMAP should be scrutinized in great detail. IF a state wants to receive the increased FMAP, then both the increased federal FMAP, and the July 1, 2008 Medicaid programs with the amount of state funds that went for such programs on July 1, 2008, must be spent on Medicaid programs. Congress intended a stimulus in Medicaid - not roads, not rainy day funds, not reallocation to other programs.

3. Could a state use the increased FMAP to pay for computers or cars used in the Medicaid program, or capital improvements to, for example, state mental institutions?

Yes, BUT only to the same extent it could use Medicaid funds for those purposes before the Stimulus package was enacted. The pre-stimulus federal Medicaid act has specific limitations on the use of funds for administrative and capital purposes. The recently enacted Stimulus did not change those limitations or requirements.

4. Some people said that their Governor was concerned that the Stimulus package is for only two years and what about the "outlier" years. That is, their Governor is concerned that if a state increases, e.g., its waivers, what will happen after the stimulus ends 12/31/2010.

No one knows the answer. Maybe Congress will extend it. Or, states retain the right after 12/31/2010 to change their state plan. But not knowing what will happen in two years is not a reason to not use the increased FMAP in the best interests of Medicaid recipients.

What is distressing is that states might not view the stimulus package as an opportunity to implement programs that in two years will actually save money!

For example, if the increased FMAP were used to move people into the community and out of nursing facilities and ICF-MRs, think about how much your state would save by 12/31/2010. If the increased FMAP were used intelligently to "End the Waiting Lists," your state would save Medicaid expenditures from unnecessarily institutionalizing people? Why not use the Stimulus to increase transition costs and case management to assist people to return to the community?

Steve Gold, The Disability Odyssey continues

To contact Steve Gold directly, write to stevegoldada@cs.com or call 215-627-7100.

Stimulus Package and Medicaid Services
Questions and Answers about the Stimulus Act and Medicaid.
2/23/2009 By: Steve Gold
	Based on the previous Information Bulletin "The Stimulus Act, Medicaid Services," some advocates asked similar questions regarding Stimulus package's $87 billion increase in Medicaid funds. Here are a few of them: 1. Could a state reduce its Medicaid services and then use the increased FMAP to bring the level of services back to the level they were before the reduction? For example, if a state were spending $100 million on a Medicaid waiver or Medicaid durable medical equipment, and assume the existing match is 60% federal and 40% state funds, could a state reduce the $40 million of state funds to $35 and then use the increased stimulus FMAP match (which could be increased to 63.9%) to bring the entire program back to $100? No. Section 5001(f)(1)(A) sets July 1, 2008 as the benchmark. A state is NOT eligible to receive the increased FMAP under the Stimulus package if its "eligibility standards, methodologies, or procedures under its State [Medicaid] plan ... are more restrictive [than] under such plan (or waiver) as in effect on July 1, 2008." July 1, 2008 is the benchmark on top of which the Stimulus' increased FMAP will work. If your State's Medicaid plan on July 1, 2008 had "eligibility standards, methodologies, or procedures" which cost $40 million in state funds, your state must keep those in effect - IF it wants to receive the increased FMAP. This is a "stimulus" act b not a "take the extra federal money and run," or "reduce the state expenditures and wind up at the same spot" act. The answer is the same whether or not your state wants to "replace" the federal funds or "reduce" the state share. 2. Could a state take some of its state Medicaid funds and, because it will receive an increased FMAP, use the state funds for roads? Or, could a state take the increased FMAP and put it in a Medicaid reserve fund? No. Section 5001(f)(3) provides that a state is NOT eligible for increased FMAP "if any amounts attributable (directly or indirectly) to such increase [i.e., in the FMAP] are deposited or credited into any reserve or rainy day fund of the State." While it is unclear what Congress meant by a "reserve" fund, it is clear that Congress intended that the increased federal Medicaid match, together with the July 1, 2008 state program and funds, be used immediately for a stimulus in the Medicaid program. A state cannot (legally) allocate, deposit, or redirect its state or federal Medicaid funds away from the Medicaid programs' payment for and delivery of actual Medicaid services because it will receive increased FMAP. Any budgetary changes "attributable" even "indirectly" to the increased FMAP should be scrutinized in great detail. IF a state wants to receive the increased FMAP, then both the increased federal FMAP, and the July 1, 2008 Medicaid programs with the amount of state funds that went for such programs on July 1, 2008, must be spent on Medicaid programs. Congress intended a stimulus in Medicaid - not roads, not rainy day funds, not reallocation to other programs. 3. Could a state use the increased FMAP to pay for computers or cars used in the Medicaid program, or capital improvements to, for example, state mental institutions? Yes, BUT only to the same extent it could use Medicaid funds for those purposes before the Stimulus package was enacted. The pre-stimulus federal Medicaid act has specific limitations on the use of funds for administrative and capital purposes. The recently enacted Stimulus did not change those limitations or requirements. 4. Some people said that their Governor was concerned that the Stimulus package is for only two years and what about the "outlier" years. That is, their Governor is concerned that if a state increases, e.g., its waivers, what will happen after the stimulus ends 12/31/2010. No one knows the answer. Maybe Congress will extend it. Or, states retain the right after 12/31/2010 to change their state plan. But not knowing what will happen in two years is not a reason to not use the increased FMAP in the best interests of Medicaid recipients. What is distressing is that states might not view the stimulus package as an opportunity to implement programs that in two years will actually save money! For example, if the increased FMAP were used to move people into the community and out of nursing facilities and ICF-MRs, think about how much your state would save by 12/31/2010. If the increased FMAP were used intelligently to "End the Waiting Lists," your state would save Medicaid expenditures from unnecessarily institutionalizing people? Why not use the Stimulus to increase transition costs and case management to assist people to return to the community? Steve Gold, The Disability Odyssey continues