COVERAGE: Implementing the Medicaid Provisions of the Stimulus Bill

Signing a $787 billion economic stimulus package—that was the easy part. Actually spending $787 billion to promote economic recovery—that's a little more difficult.

The American Recovery and Reinvestment Act of 2009 (ARRA) sought to stimulate the economy while laying the foundation for long-term economic growth. The Kaiser Family foundation has an excellent overview of the bill's specific Medicaid and health provisions, as well as a breakdown of state-specific allocations.

Now, as real money begins to flow, the plan's implementers are being forced to balance the sometimes competing goals of spending quickly and spending smartly.

The challenge is particularly clear in Medicaid. The stimulus provided $87 billion in additional federal funding for Medicaid. The money is intended to help states maintain Medicaid coverage during an economic downturn—a time when state revenues are declining at the same time enrollment in public coverage is rising.

While the states may have received a two year reprieve for Medicaid, the question remains, what to do with the state money that has been freed up by the stimulus funds? The Washington Post reports on this developing debate:

In Virginia, the state hospital association urged the state to set aside much of the $600 million made available by the increased federal share to cover an anticipated surge in Medicaid costs in the next few years, which will be a particular challenge once the stimulus funds dry up. But the governor and legislature have agreed instead to use the freed-up money to balance the current overall budget to prevent layoffs in other areas— a course most other states are also pursuing.

"Title V-State Fiscal Relief" of ARRA gives the purpose of the increased federal aid as twofold:

(1) To provide fiscal relief to States in a period of economic downturn

(2) To protect and maintain State Medicaid programs during a period of economic downturn, including by helping to avert cuts to provider payment rates and benefits or services, and to prevent constrictions of income eligibility requirements for such programs, but not to promote increases in such requirements

Our economy lost another 651,000 jobs last month. The 0.5 percent increase in the unemployment rate translates into an enrollment increase of 500,000 for Medicaid and SCHIP according to analysis from the Kaiser Commission on Medicaid and the Uninsured.

Clearly the first priority should be to ensure States can continue to cover those already covered in Medicaid and are able to cover those who became eligible as a result of the economic downturn.

Beyond that, the answers are unclear. As the Post notes, from a macro-economic perspective, what matters most is that the money gets spent and stimulates the economy.

From a state perspective, almost every legislature is legally required to balance their budget. It's hard to criticize lawmakers for using the funds to put off cuts that would have otherwise meant lost jobs and further hardship. Still critics are right to argue that simply maintaining existing Medicaid programs will do little to put the program (or state budgets) on a more sustainable long-term path.

For proponents of health reform, the current debate should serve as a reminder that while the economic stimulus may have been a down payment on reform, there are still many installments left to come. The Medicaid and health provisions of the economic stimulus may salve our fiscal and economic woes, but only true, comprehensive health reform can solve them.