Governor Pawlenty will need to drop cuts to get federal Medicaid money

One of the most important provisions included in the massive $787 billion Economic Recovery and Reinvestment Act awaits President Obama’s signature is $87 billion in increased federal funding for Medicaid. Under current rules, Minnesota and the federal government each pay half of the cost of Medicaid for low-income Minnesotans. The new legislation would increase the federal share (known as FMAP) to 56.2% from October 1, 2008 through December 31, 2010. Minnesota is also likely to qualify for an additional increase due to our high levels of unemployment.

Minnesota’s share of increased Medicaid funding is expected to be in the range of $2 billion, but the money comes with an important caveat. Under a “maintenance of effort” provision, states cannot make the criteria for qualifying for Medicaid more restrictive than it was on July 1, 2008. In Minnesota, this provision would also impact parents covered by MinnesotaCare. The maintenance of effort restrictions apply to eligibility changes and enrollment/renewal procedures.

Minnesota Management and Budget Commissioner Tom Hanson recently told KSTP TV that the governor will have to drop some of his proposed cuts to health programs in order for the state to receive its share of the new FMAP money. The commissioner predicted that cuts ranging from $89 million to $200 million would have to be undone.

Governor Pawlenty and other governors have previously argued that they need flexibility to restructure their state health care programs to control costs. For now, it looks like Congress may have postponed those plans, preventing governors from cutting low-income families off of health care financed (in part) with federal funds.

The Governor’s proposals to cut health care for childless adults, however, could stand. No federal funds are used to pay for these benefits.

-Steve Francisco

About Steve Francisco

Steve Francisco is the former federal policy analyst for the Minnesota Budget Project.
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