Senate GOP’s COVID-19 response sets up battle over Medicaid

The Senate didn’t include a funding increase for Medicaid in its COVID-19 response bill, ignoring pleas from both Democratic and Republican governors and teeing up a contentious fight with the House over spending on the health care program for the poor. 

Governors facing massive budget shortfalls caused by the economic downturn have warned they will have to cut Medicaid and other programs if they don’t get more help from Congress, but those warnings did not sway Senate Republicans, who have resisted what they say would be “bailouts” of state and local governments.

“At the end of the day, it’s got to be in there,” said Matt Salo, executive director of the National Association of Medicaid Directors (NAMD). 

“We’re in this perfect storm of hurt. … The only way to get out of it — states are not able to get out of it because states can’t print money and states have to balance their budgets — the only way out of this is aggressive, concerted, federal, congressional action.” 

Medicaid — which is jointly paid for by states and the federal government — covers about 70 million people, but enrollment is expected to increase as people lose their jobs and become newly eligible for the program.

States are also facing increased costs from paying for COVID-19 treatment and services for beneficiaries. At the same time, tax revenue is falling, leaving massive budget holes that states are required to fill. 

During recessions, governors and state legislatures tend to cut costly programs like Medicaid, which consumes about 20 percent of state budgets. 

To avoid cuts, groups like NAMD and the National Governors Association (NGA) want Congress to temporarily increase the share of Medicaid costs paid by the federal government, to help cover increased enrollment costs and to free up state money for other areas like education. 

A COVID-19 response bill recently passed by the House would increase the share of Medicaid costs paid by the federal government, but it has not been considered by the Senate. 

Now House and Senate negotiators will have to hammer out a compromise in a final package that Congress hopes to pass in the coming weeks. 

“There is increasing recognition that something needs to get done,” Salo said. 

“I feel confident that we will get there.” 

A spokesperson for House Speaker Nancy Pelosi (D-Calif.) said: “This is obviously a critical program, which is why it was in the HEROES Act.”

However, Senate Republicans and the Trump administration have a complicated history with the Medicaid program and have spent the last few years trying to reduce spending and decrease enrollment among childless adults.

One disagreement between Republicans and Democrats is over a requirement passed in a previous COVID-19 response bill that prohibits states receiving increased Medicaid funding from cutting benefits or restricting eligibility. Republicans think the requirement is too restrictive to states and want to change it in the next response bill. 

Congress passed a COVID-19 response bill in March that increases the federal government’s share of Medicaid costs, but governors say more help is needed. 

“The COVID-19 pandemic is drastically shrinking state and local revenue with most states experiencing a budget shortfall ranging between 5 and 20 percent,” the NGA and other groups wrote in a letter to congressional leaders earlier this month.

“Even states with a lower shortfall will be challenged to provide adequate healthcare services to their residents. This leaves state and local leaders with tough choices to balance their budgets while responding to a pandemic.”

Colorado has already cut funding to its Medicaid dental program and cut payments to some providers by 1 percent. Medicaid rates are already typically lower than rates paid by Medicare and private insurance. Other states, such as Florida and Tennessee, have put off planned improvements to the Medicaid program, like increases in provider rates and extra services for pregnant women. 

Federal law prohibits states receiving increased Medicaid funding from cutting required benefits, increasing premiums or restricting eligibility — restrictions Congress put in place to protect beneficiaries from losing coverage during the pandemic.

That means in order to find savings, states turn to cutting provider rates, which some experts say could be disastrous, especially for those that primarily see Medicaid patients.

Those providers are already struggling as they see fewer patients to maintain social distancing, and more people are staying at home and avoiding nonemergency care. 

“Medicaid provider payment cuts will compound financial damage from the pandemic, raising the risk that pediatricians, behavioral health providers and safety net clinics close their doors,” said Aviva Aron-Dine, vice president for health policy for the Center on Budget and Policy Priorities.