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More Federal Money on the Way?!

First, some background… When President Obama signed the American Recovery and Reinvestment Act (aka the federal stimulus) early in his presidency, states got a fiscal boost due to an increase in FMAP. FMAP is the ratio that the federal government pays towards states’ Medicaid programs.

For instance, prior to the stimulus, the FMAP for Medi-Cal was 50%. That is, for every $1 spent on our Medi-Cal program in California, the federal government covered 50 cents. After the stimulus, the federal share went up to 61.59%. This resulted in billions of dollars of savings for the state.

Yet, the new matching rate is set to expire on December 31. If it does, states in deep fiscal holes, like California, would be forced to make up the difference elsewhere — either in cuts to other programs/services or increased revenue.

On May 28th, the House of Representatives approved an “extenders” bill for various programs, but omitted the FMAP extension provision in an effort to secure enough votes for passage.

Here’s the good news… Today, California Health Line is reporting that the Senate plans to restore FMAP extension in the bill. This would mean California would receive the $1.5 billion in increased federal aid that Gov. Arnold Schwarzenegger assumed in his May revise proposal.

This is by no means a done-deal, but it is a promising sign for our state budget. Stay tuned…