Understanding how the new Medicaid program is a firm commitment

Stand_with_54,000 blueThere was much hand-wringing earlier this week from opponents of LB 577, the bill that would implement the new, extended Medicaid program in Nebraska, when it was announced the federal government would be reducing its funding for our state’s existing Medicaid program by $8 million next year.

Opponents would love to use this reduction as a sign of the instability of Medicaid or an indication the federal government has a shaky commitment to the future of the program.

However, those fears are unfounded, empty rhetoric.  And here’s why.

The people that currently are eligible for Medicaid and the population that would receive health care access through LB 577 are two separate groups covered by two separate sets of rules.

The federal government reimburses each state for the cost of its current Medicaid program to varying degrees through a formula called the Federal Medical Assistance Percentage (FMAP).  The FMAP for each state is determined each year by the U.S. Department of Health and Human Services and falls between 50 percent and 83 percent of a state’s Medicaid costs depending on each state’s per capita income.  Simply put, the better a state is doing financially, the less the federal government reimburses it for Medicaid.

This change in Nebraska’s FMAP reduces the federal share of our current Medicaid program from 54.74 to 54.28 percent – a change of .46 percent.  It reflects Nebraska’s strong economy.  And the FMAP is not calculated arbitrarily, it is arrived at through a very specific process.  So a state cannot be blindsided by funds that it knows will vary from year to year.  Moreover, the federal government has never failed to meet its obligation under the FMAP formula and in fact increased Medicaid funding to states during the recession when more people were eligible for Medicaid.

However, the new Medicaid program (LB 577) is funded in a very specific, defined way.  The FMAP is spelled out very clearly in the Affordable Care Act and cannot change.  Under the ACA, the federal government will fully fund 100 percent of the cost to extend Medicaid from 2014-2017.  After that, the federal government’s share gradually reduces to 90 percent in the year 2020, where it will stay for the indefinite future according to the law.

And Medicaid is the closest thing to a sure bet as there is in Washington.  Since the program began in 1965, the federal government has never unfunded a Medicaid commitment.  There is no basis to believe they would start with the new Medicaid program.

This means Nebraska state officials will always know how much funding it will receive for the new Medicaid program, bringing stability to the state’s budget.  A UNMC report estimates LB 577 would return $2.3 billion to our economy, stimulate more than $700 million in economic development, and fund 10,000 jobs a year through 2020.

All of that shows LB 577 is not the risky venture opponents would have you believe, but a wise investment our budget cannot afford to pass up.

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