As COVID-19 cases begin to rise for a second time, states are again faced with challenges in treatment that require flexibility, creativity, and – at times – changes to long-standing protocols. One strategy that has differed from state to state: Medicaid expansion. Here, we provide a quick recap of federal Medicaid expenditures and examine how different states have responded differently to the unique challenges of 2020.
Federal Medicaid Expenditures Increased
A recent brief from Kaiser Family Foundation summarizes data gathered by the Bureau of the Fiscal Service on federal Medicaid spending before and during the COVID-19 pandemic. The analysis concluded that Medicaid expenditures increased at a rate of 12% in 2020, nearly double the 2019 spending rate of 5.2%. This made the total spending for federal Medicaid expenditures in 2020 $458 billion.
This significant increase in spending, when comparing month-to-month growth over a period of two years, can be primarily attributed to the COVID-19 pandemic. During economic downturns and unexpected health crises, more people enroll in Medicaid as incomes fall and times become more difficult, thus increasing state program spending. In these instances, federal Medicaid expenditures enabled states to access enhanced Medicaid funds to support the increased need.
This increase was made possible, in large part, by the Families First Coronavirus Response Act (FFCRA), which increased the federal Medicaid match rate (FMAP) by 6.2%. The majority of federal Medicaid expenditures fell in the second half of 2020, when retroactive claims, enhanced matching funds, and increased enrollment rates combined to create higher growth overall.
State Medicaid Expansion Impacts Policies, Spending
Prior to the pandemic, a study from Health Affairs highlighted differences in policy when comparing Medicaid expansion states to nonexpansion states. The study, conducted from 2000-2016, examined policies related to four key indices:
- “Income eligibility,
- Administrative burden,
- Immigrant eligibility, and
- Benefit comprehensiveness.”
Researchers found Medicaid expansion states ranked higher along all four indices than nonexpansion states, with clear policies in place for each index. Researchers determined that creating more unity in policies across states could be influenced by changes at the federal level.
Shortly following this research, the pandemic started, and new data emerged indicating that the impact of COVID-19 on Medicaid spending would be higher than anyone had anticipated. Original projections from states for 2020 Medicaid spending included flat enrollment and a less than 1% increase in enrollment growth. Instead, enrollment increased more than 6% due to economic and employment fluctuations that made more people eligible for Medicaid.
Over half of the states participating in the study reported they have already exceeded their spending projections for 2020, and 40% reported they anticipate a deficit at the end of 2020. In addition, 29 out of the 30 participating states are now projecting their 2021 Medicaid spending costs will exceed their 2020 spending—and one state believes the impact on spending will continue beyond 2021.
Conclusion
Despite the clear growth trends in Medicaid expenditures and Medicaid expansion, the future of federal and state Medicaid programs remains unclear. The FFCRA is set to expire January 21, 2021, with the enhanced FMAP expiring in March. Many states are projecting a deficit by the end of 2021 unless new assistance is offered.
Meanwhile, enrollment continues to rise, as are the number of COVID cases nationwide. With a new administration soon to be in place, everyone will be waiting to see whether a new relief bill is passed or the existing relief will be extended.