LANSING – If Congress fails to approve $525 million in Federal Medicaid Assistance Percentage funds to assist with Medicaid costs, cuts would not fall on Medicaid, but other general fund programs, a top Medicaid official said.
Steve Fitton, the state director of Medicaid, said the state will have to look elsewhere for cuts because federal law prohibits cutting Medicaid caseloads to save the money. The other possible places to look for savings in Medicaid – elimination of so-called optional services and reducing reimbursement rates – are untenable, he said. Several optional services already have been eliminated and Michigan’s rate of reimbursement to providers who take Medicaid patients is among the lowest in the country, Fitton said.
“We already rank about 45th in the country for our provider reimbursement rates,” he said. “So far, the system has held up, largely because of the charity of providers.”
However, he said, there is already an access problem for Medicaid patients as more and more providers opt out of accepting Medicaid. He said the rates are likely as low as they can go without the system hitting “a breaking point.”
The strong potential for the FMAP funding not to materialize has brought work on the budget process to a virtual halt. The administration of Gov. Jennifer Granholm presumed – as did nearly every other state – that the six-month extension of higher FMAP rates would win congressional approval.
If federal legislators don’t approve the extension, which would increase FMAP funds from January 2011 through June 2011, state officials would probably look at reducing spending across the board, including in two of the largest budgets in the state – education and corrections, he said.
“We need guards at the prisons and nobody wants to cut education, so it’s hard to contemplate where cuts would come from,” Fitton said.
Although the responsibility for those decisions would befall the next governor, FMAP doesn’t seem to be a focus for gubernatorial candidates, as only one, Lansing Mayor Virg Bernero, a Democrat, returned phone calls for the story. Bernero was not familiar with FMAP and therefore said he wasn’t prepared to comment on the issue.
U.S. Rep. Peter Hoekstra (R-Holland), a candidate for governor, said during a news conference on a separate issue Friday that he is unsure how he will vote on the FMAP extension, should it come before the U.S. House.
“That’s something we’re going to have to take a look at,” he said. “Exactly what form is it going to come to you in?”
The FMAP extension has been tied to other issues in federal legislation, including in the U.S. Senate when it was lumped in with an extension in unemployment.
Since Republicans have largely held up the legislation including FMAP spending over concerns it increases the federal deficit, Gongwer News Service attempted to contact several GOP members of the state’s congressional delegation, but calls went unreturned to U.S. Rep. Thaddeus McCotter (R-Livonia), U.S. Rep. Candice Miller (R-Mount Clemens), U.S. Rep. Fred Upton (R-St. Joseph) and U.S. Rep. Mike Rogers begin_of_the_skype_highlighting end_of_the_skype_highlighting (R-Brighton).
Many argue that lawmakers should have already trimmed next year’s state budget in anticipation of the end of increased federal funds, instead of basing appropriations on an assumption.
A Senate Fiscal Agency memo released earlier this week cautioned leaders to erase the FMAP increase assumption from the budget, even as it said there is “still a chance Congress will vote in favor of the extension.”
“But the cuts that would have been necessary without the extension were draconian and no one wanted to do it without cause, especially when it seemed the extension would go through,” Fitton said.
Rep. Tom McMillin (R-Rochester Hills) said the “painful cuts” Granholm has said would be associated with fewer federal dollars are “no more pain than the private sector has been feeling for years.”
He reiterated the call that has come from many Republicans not to rely on revenue from increased taxes or the federal stimulus but to trim down expenses, specifically, he said, by “standing up to the unions and really negotiating state worker contracts that end Cadillac benefits for state employees.”
“The quicker we stop letting the feds bail us out, the quicker we get back to reality,” he said.
But Michigan leaders weren’t alone in expecting the extension, (nearly every state included the increased FMAP funds in their budgets) and certainly weren’t being unrealistic, Fitton said.
“A lot of people close to Congress had every indication that there was the will to pass the extension,” said Fitton, adding he “still doesn’t think negotiations are over.”
The U.S. Senate could take another vote on the issue, and Democrats may have the votes they need for the legislation to pass once they replace the late U.S. Sen. Robert Byrd (D-West Virginia), a move that was planned for Friday.
Staff for U.S. Sen. Debbie Stabenow (D-Lansing) did not return requests for comment as to what her role in the FMAP legislation might be.
INSIDE F.M.A.P.: With all the talk about whether the state will get more federal funding, perhaps an explanation of exactly how the program works is in order.
FMAP is the way the federal government arrives at the amount it will pay states for Medicaid costs, since Medicaid was designed to be a shared program by the state and federal government, Fitton said.
The assistance percentage (the AP in FMAP) floor for any state is 50 percent, meaning for every $1 a state invests in the program, the federal government would pick up at least 50 cents. The percentage is then adjusted through a formula that considers a state’s average personal income.
Michigan has historically had a match of around 57 percent, Fitton said, but as the economy “tanked,” personal incomes fell and the percentage rose.
The actual matching rate for Medicaid, without stimulus funds, is now at 63 percent and projected to rise to around 66 percent for next fiscal year.
However, when the stimulus package was passed, it included an increase in the matching rate for states that is tied to the growth in unemployment.
That effectively increased Michigan’s federal matching rate by 10 percent from fall of 2008, through December 31, 2010, increasing federal funds by more than a billion dollars in that time period.
The extension denied by Congress would have retained the increased rate through June of next year.
Fitton said with the number of residents on Medicaid hitting a record every month, the state will likely spend more next year on Medicaid than this year’s $11 billion, but without the extension, it would receive a 10 percent lower match in federal funds to cover those costs.
He said the federal government would no longer be fulfilling the stimulus’ goal for FMAP, which was to “give more money to states because there is more pressure on Medicaid as the economy fails and to generally ease economic stress.”
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