Thursday, June 10, 2010

Georgia's New Budget Depends on Extended Federal Help, Senate Set to Take up Legislation This Week

Georgia is among 30 states that have built their state budget assuming that enhanced Medicaid funding will be available through next June, when our budget year ends. Georgia's budget, as recently signed by the governor, includes nearly $750 million of these federal funds, also known as FMAP. "Georgia would realize only half of this amount if Congress allows the funding to expire on December 31, 2010, as scheduled," said Tim Sweeney, the Georgia Budget &Policy Institute's senior healthcare analyst.

"Thanks to the increased federal help granted as states' unemployment rose and Medicaid caseloads increased, Georgia has not made major cuts to Medicaid eligibility levels or to the reimbursement rates paid to healthcare providers serving Medicaid patients," said Sweeney. Rates already fail to cover providers' full costs.

Last week, the U.S. House of Representatives stripped the extended FMAP funds out of a bill to extend a variety of Recovery Act provisions. The Senate now has the opportunity to restore this temporary extension to stabilize the states a little longer as their economies slowly recover.

"If Congress does not extend enhanced FMAP then Georgia's new budget will be seriously out of balance when the new fiscal year starts July 1," said the Institute's executive director, Alan Essig. "But this would be just the beginning."

Georgia lawmakers are using enhanced FMAP to offset spending that would otherwise have come from state sources, as the Recovery Act intends. If, instead of finding additional state revenue, lawmakers cut the Medicaid program to save $375 million, the state would also forgo more than $650 million in federal funds that are in the state's Medicaid base budget (a total of $4.7 billion of federal funds are the base budget, not shown in the chart above).

This $1 billion loss would represent nearly a 15 percent loss to Georgia's Medicaid program. A deficit of this magnitude requires significant new revenues or devastating cuts to provider reimbursement rates, patient eligibility, covered services, or all of the above.

Although Georgia lawmakers have not indicated precise alternatives to finding revenues, budget proposals discussed in the recent legislative session indicate that across-the-board cuts to Medicaid provider reimbursement rates of at least 20 percent would be needed if lawmakers do not add new revenues.

"Cutting Medicaid reimbursement rates 20 percent likely would result in hospitals closing, many doctors and other healthcare providers denying service to Medicaid patients, and further trouble for local communities that depend on their healthcare sector for jobs," said Sweeney.

If Congress does extend FMAP temporarily, it serves the dual purpose of giving Georgia lawmakers time to put new state revenues in place as federal Medicaid funds expire next June. Extending FMAP is crucial to Georgia's ability to weather the Great Recession and avoid crippling cuts to the healthcare infrastructure of the state.

"We urge Governor Perdue to work closely with our congressional delegation to assure they extend enhanced FMAP funding, thereby protecting Georgia's healthcare sector and our citizens' health and security," said Essig. "If Congress eliminates these funds prematurely, it will hurt our healthcare sector and local economies that depend on it. Georgia is not out of the woods yet."

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