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Legislators see flaw in Medicaid formula

By Christine Jordan Stexton
11/11/2009 © Health News Florida
Top legislative leaders are complaining that Florida will be shortchanged under a formula that determines how much money they will receive to treat the poor, elderly and disabled.
Senate President Jeff Atwater on Tuesday wrote a letter to Sens. Bill Nelson and George LeMieux urging them to address a “serious flaw” in the calculation of the Federal Medical Assistance Percentage, FMAP, which is used to calculate how much money the state will received from the federal government to help pay for the costs of the Medicaid program.
Florida received a significant bump in its FMAP when Congress passed the American Recovery and Reinvestment Act of 2009, but that increased contribution is slated to end Dec. 31, 2010. If the underlying formula isn’t addressed, Atwater said in his letter, Florida would have to spend an additional $668 million in state dollars to continue to fund Medicaid services at current levels.
Finding the money won’t be easy given the continuing budget crisis the state faces. The latest budget projections show that Florida’s budget deficit could be as high as $2.6 billion.
“The fiscal crisis we find our state currently in, our continued duty to care for the vulnerable amongst us, and the increasing numbers of both Medicaid recipients and the unemployed, all combine to make the choice of extending the enhanced FMAP an imperative,” Atwater wrote in his two-page letter. “Please assist us in helping your colleagues understand the dire importance of making the right choice.”
The letter also was signed by Senate Appropriations Chairman J.D. Alexander, and Sens. Durell Peaden and Nan Rich, who both serve on the Health and Human Services Appropriations subcommittee.
States and the federal government split the cost of Medicaid using the FMAP formula. The formula is based on a state’s per capita income and how that compares to other states.
Florida’s federal match was significantly ratcheted back in 2007, in part due to the tens of billions in insurance money that was funneled into the state to rebuild homes and roads after the 2004 and 2005 hurricane seasons when eight storms hit the state.
“Specifically, the formula is not designed to account for artificial spikes in a state’s economy caused by one-time occurrences such as natural disasters,” Atwater wrote in the letter, adding that the increased economic activity translated to an "artificial depression" of Florida’s federal share of dollars between 2007 and 2009, resulting in a notable loss of federal funds to Florida.
Atwater said the approximate loss to Florida was $459.6 million.
Initially, the state was able to absorb the hit because the state economy was strong. Additionally, lawmakers trimmed back spending in health care. But as the economy weakened and spending cuts mounted, the National Governor’s Association, among others, lobbied Congress to alter the funding formula as part of the American Recovery and Reinvestment Act of 2009.
Florida was one of the big winners in the ARRA package as the federal government agreed to increase Florida’s match from 55 cents on the dollar to about 68 cents on the dollar. As part of the agreement the state had to agree not to cut any programs.
The money spared the popular Medically Needy program and the MEDS-AD program from being eliminated this year.
But now the extra funding is scheduled to dry up at a time when demand for Medicaid services are growing as a result of the downturn in the economy. Budget economists say there will be a 13 percent increase in the number of Floridians who need the program, mostly women and children.
At a Senate health care spending committee meeting last month, both Peaden and Rich expressed concerns with the formula. It is “way out of whack, not equitable and not right,” Rich said at the time.
Peaden opined that the formula will “break the state of Florida if (it) is not addressed in the proper manner."