Federal Coronavirus Response Increases Medicaid Funding for States

Regulation | March 27, 2020 | by Brendan Flinn

This article summarizes key provisions related to Medicaid in the legislation signed on March 18, the Families First bill, as well as the third coronavirus stimulus bill expected to become law by the end of March.

As the federal government takes steps to address the COVID-19 pandemic, one tool that it has adopted is the Medicaid program. This article summarizes key provisions related to Medicaid in the legislation signed on March 18, the Families First bill, as well as the third coronavirus stimulus bill expected to become law by the end of March.

Increases to Share of Medicaid Spending

Each state has its own Medicaid matching rate, or the percent of Medicaid spending the federal government covers. By law, the federal government covers at least 50% of Medicaid costs in each state, with poorer states receiving a higher match rate.  

The Families First bill increases each state’s matching rate by 6.2 percentage points for 2020. So, if a state’s matching rate for 2020 were to be 50%, under Families First its matching rate is now 56.2%. The increased federal share of Medicaid does not apply to the expansion population.

Researchers have estimated this will increase federal funding for Medicaid by $35.7 billion. You can see an estimate for how many federal dollars are estimated to go to your state here.

The idea behind increasing the federal share of Medicaid spending is to help free up state budget dollars during the pandemic. Throughout the pandemic most states will see significant decreases in revenue due to decreased economic activity. While the federal government likely will too, many state governments have balanced budget laws that will require significant cuts to spending as a result of the loss of revenue. The federal government does not. Raising the federal share of Medicaid spending allows states to take their budgets further and help stave off cuts within Medicaid and to other programs.

It is important to note that this increased federal Medicaid spending is made to states. Increases in the federal Medicaid share do not go directly to providers or, in states with managed care in Medicaid, managed care organizations. State agencies will receive these funds as they typically do from the federal government and provider reimbursement will not change unless states take steps to make changes. There is no requirement that states do that.

States Must Maintain Eligibility Criteria

The new federal funding for Medicaid is conditioned on states maintaining the current eligibility criteria and premium policies they had set as of January 1.

In other words, states are not allowed to impose more restrictive eligibility criteria (e.g., functional eligibility) or charge higher premiums (or introduce premiums if they did not have them before January 1). In addition, the funds are conditioned on continuous eligibility for all enrollees as of March 18. If a person was enrolled in Medicaid on that date, their state cannot dis-enroll them from Medicaid until the national emergency period ends.

The increased funds do not prevent states from expanding Medicaid or making it easier for people to qualify. Current eligibility criteria serve as a floor, not a ceiling, for the purposes of these funds.

Medicaid Coverage for COVID-19 Services

The increased federal match rate for Medicaid is also conditioned on COVID-19 services. Specifically, states must not impose any Medicaid cost sharing for any services related to COVID-19, including testing and treatment.

States also have the option to extend Medicaid coverage to their uninsured populations solely for COVID-19 testing. The federal government will pay the full bill for this testing.

Support for Home and Community-Based Services

The third coronavirus bill, expected to become law shortly after March 27, also includes provisions supporting Medicaid, including home and community-based services.

The bill extends the Money Follows the Person (MFP) program through November 2020. Previously scheduled to expire in May, MFP provides enhanced federal dollars to support people transitioning from nursing homes to home and community-based settings.

In addition, the bill extends federal protections for spouses of people receiving Medicaid HCBS through November 2020. These were also going to expire in May. Such protections exist permanently for spouses of people in nursing homes, and exist at the state level in most, but not all, states.

Stimulus Funds and Medicaid Eligibility

A key provision of the third coronavirus response bill provides direct payments to individuals and families. Under the bill, those payments will not count towards Medicaid income eligibility thresholds. People receiving Medicaid, including in nursing homes and in home and community-based settings, will not lose their services because of the funds these payments will deliver.

Next Steps

LeadingAge will continue to monitor Medicaid developments at the federal and state levels. Please visit our COVID-19 resource page at www.leadingage.org/COVID19 for more information, or email covid@leadingage.org with questions or concerns.