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WHAT DOES EXTENSION OF “STIMULUS”/ARRA/FMAP MEAN TO MEDICAID PROVIDERS?
September 2, 2010
Background on ARRA (Stimulus)
Many have read in the press or email that the President has now signed legislation to extend Federal “Stimulus” funding through June 2011. Also known as the American Recovery and Reinvestment Act of 2009 (ARRA), “Stimulus” funding is federal financial assistance to states, allocated through several agencies/programs including State Departments of Education and Medicaid, among others. Per federal law, ARRA funds were set to expire on December 31, 2010, halfway through states’ fiscal years. Assuming that the federal government would adopt legislation to extend funding to the end of states’ fiscal years (June 30, 2011), many states (Nebraska not included) set fiscal year 2010-11 appropriations relying upon an influx of ARRA funds into their General Funds. Therefore not extending ARRA would cause drastic immediate shortfalls in funding to cover existing state financial obligations.
A month ago, it appeared that funds would not be extended despite massive, multifaceted lobbying attempts by a myriad of beneficiaries of state funding programs across the country. Thankfully, Congress did ultimately extend funding, albeit in reduced amounts (see below), and also less critical of an issue in Nebraska where current year appropriations including the dollars for Medicaid were not dependent upon the extension.
Stimulus/ARRA Funding in Nebraska
In Nebraska, the extended ARRA funding will include approximately $59 million in education funding that will be allocated through the school funding formula specifically to K-12 school districts. It also includes approximately $64 to $69 million received as the “enhanced” Federal Medicaid Assistance Percentage (FMAP) funding. (Normally for every $1 paid in Medicaid costs, approximately 40 percent is paid by the state and 60 percent is paid by the feds. ARRA increased the federal portion by 6.2 percent through December 31, 2010. Between October 2008 and the end of 2010, Nebraska will have received into its General Fund approximately $291 million in expanded “FMAP” funds that it otherwise would not have. The extension to June 30, 2011, will bring in the additional $64 to $69 million.)
Will Governor Heineman Apply for the Funds?
Earlier this week, Health and Human Services Secretary Kathleen Sebelius wrote the nation’s governors about the forthcoming financial assistance. States no longer will automatically receive the portion of these funds; rather for the 6 month period beginning January 1, 2011, each state must apply for the aid by September 24, 2010. States that submit applications will receive a 3.2 percentage point FMAP increase from January to March 2011, and a 1.2 percentage point increase from April to June 2011, with additional percentage points to be allotted to states with high unemployment.
The Governor has publically indicated that he will seek the $59 million in additional education stimulus funding because if a governor does not specifically ask for the money, federal law requires the U.S. Department of Education to give it to some education agency in the state that asks. A gubernatorial request better ensures allocation pursuant to the Nebraska state aid formula. The Governor has not yet indicated that he will apply for the FMAP funding; however, there have been no specific indications to the contrary as confirmed by aides to the Governor.
Where will these funds be spent?
The $64-69 million will inure to the state General Fund as unobligated revenue available for spending on any General Fund program. Thus, specifically pursuant to the enhanced FMAP extension, providers will see no adjustment to rates or funding levels now in Fiscal Year (FY) 2010-11. This is because Nebraska has already set its appropriations and established rates for Medicaid providers; there is no requirement or process for allocating these funds to providers mid-fiscal year. In fact, this was also the case with the initial $291 million. The Medicaid program provides a means for federal funding to flow to state General Funds. The extent to which these funds would benefit Medicaid providers vis-à-vis any other General Fund program such as prisons or the State Patrol in any state is up to the Legislature in that state.
There is a benefit to Medicaid Providers but it is “Indirect”
Because the current “General Fund Financial Status” posted on the Legislative Fiscal Office website shows a $751 structural deficit by the end of FY 2013, Nebraska needs any influx of non-tax funding it can get. When the 2011-13 biennial budget is adopted next spring, that “deficit” must be eliminated by policy decisions to cut spending or increase available revenue.
Currently, the Legislature and Governor are actively looking for cuts to reduce the projected shortfall and bringing in roughly $128 million reduces it to $623 million (subject to future tax receipts, appropriation levels, Cash Reserve Fund transfers, etc). Although the $59 million in education funding must flow to schools, it reduces schools’ need for existing General Funds. And although the roughly $69 million in additional FMAP is not restricted for payments for Medicaid beneficiaries and providers, its receipt significantly reduces a deficit in total funding for state services, of which Medicaid is the second largest.
For questions or comments, please contact Brendon Polt at (402)435-3551 or brendonp@nehca.org.
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