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The Changing Face of Medicaid

Medicaid has undergone a number of cuts and proposed changes at the federal and state level. On July 1st, the FMAP for Medi-Cal will revert back to 50% from the enhanced 62% match that resulted from the American Recovery and Reinvestment Act of 2009 (ARRA). This decreased match marks the end of $90B in national Medicaid funding during the nation’s economic downturn.

DCHS estimates for FY 2011-2012 show that as the enhanced FMAP for Medi-Cal began to phase down, the total state share for Medi-Cal spending amounted to $18.6B. Assuming that the total Medi-Cal estimate remains consistent for the coming fiscal year (FY2012-2013), the state share will increase to $21.5B when the federal match returns to 50%. Given California’s $9.6B deficit and cuts to previous years’ budget plans, this increase in state share spending poses a real threat to Medi-Cal funding.

In the May Revise, Governor Brown proposed a one-year extension of the hospital fees to generate a $320M savings in Medi-Cal. The Governor also estimated $31.2M in savings to the state’s General Fund by shifting 900,000 children from Healthy Families to Medi-Cal. Stakeholders criticized this shift for its potential to decrease children’s access to care. A recent New England Journal of Medicine study in Illinois reported significant disparities in access to outpatient specialty care for children with Medicaid. They attributed this disparity primarily to specialists’ reluctance to accept appointments for Medicaid patients due to low reimbursement rates. With California’s Medi-Cal physician reimbursement rate ranking 46th in nation, stakeholders could have a warranted concern.

Medicaid is under consideration for other drastic proposals at the federal level. Chairman of the Budget Committee, Representative Paul D. Ryan (R-Wisconsin) has proposed that Medicaid funding be disbursed as block grants, a shift from its current uncapped entitlement format. States would be given a lump sum of federal dollars. Conservatives argue that this would give states more flexibility with their Medicaid programs; however, others criticize that the transformation would make Medicaid even less affordable for states during times of economic downturn. With its current fiscal and economic problems, California would be no exception.

With limited funding streams, a number of federal and state budget proposals, and no clear sense as to how these fiscal concerns will be settled, the future of Medicaid is uncertain. Where will California’s Medicaid program be in the coming months and years? The answer remains to be seen.

For more on the enhanced FMAP for Medicaid, see this fact sheet from www.kff.org

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