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AHCA Warns Medicaid Costs Could Soar Due to COVID-19

Florida’s Medicaid program is projecting a significant shortfall (approximately $1 billion) in the 2020-2021 budget due to ballooning Medicaid enrollment (largely due to the impacts of COVID-19). As more and more Floridians lose their jobs and their health coverage due to the economic downturn, many turn to Medicaid as their form of healthcare Florida’s Agency for Health Care Administration (AHCA) forecasts that there will be an additional 437,390 Floridians turning to Medicaid for their health care in the coming new fiscal year, which starts July 1. The increase in enrollment could potentially increase the overall cost in the coming year by as much as $3 billion; however, the state is not on the hook to cover the full $3 billion due to the federal-state partnership for Medicaid financing, formally known as the Federal Medicaid Assistance Percentage (FMAP). Florida is expected to pay about $1.07 billion of the $3 billion, based on AHCA’S analysis.

In the short term, AHCA anticipates that during the final three months of the current fiscal year alone (April 1- June 30), an additional 109,348 people will enroll in Medicaid and overall costs could exceed what was budgeted by $186.9 million. The analysis by AHCA projects that the state would be responsible for about $66.5 million, with FMAP covering the rest; however, the real financial pressure will most likely be felt in the new fiscal year.

Not only is AHCA feeling the impact of the projected budget shortfall, the agency is also being affected by the Federal Centers for Medicare and Medicaid (CMS), which proposed a rule in November 2019 that would eliminate some financing options that have long been available to states. This has the potential to catastrophically impact the state’s Medicaid budget, and when coupled with the budget shortfall, will significantly strain the functionality of  Florida’s Medicaid Program through substantial cuts to benefits, coverage, and provider payments.

The news is not entirely negative, however, there may be protection for state Medicaid budgets. A recent analysis by the Kaiser Family Foundation stated, “The current financing structure of Medicaid provides some protections for states facing higher Medicaid costs as a result of COVID-19 and changing economic conditions.” When Medicaid expenditures rise during an economic recession, these added costs are shared by the federal government and there is no limit on available federal funds. States also often turn to increased reliance on provider taxes  (A health care provider pays a tax or fee to the state government, which then uses the money as the state's matching funds to bring in additional federal Medicaid money according to the individual state's match rate) to help increase the state share of Medicaid during economic downturns.

The  Coronavirus Aid, Relief, and Economic Security (CARES) Act provides some additional protection for state Medicaid budgets. The CARES Act includes some important provisions affecting Medicaid; they fall into two categories: (1) clarifying Medicaid changes in the Families First Act and (2)the extension of some provisions scheduled to expire on May 22.

Changes made to the Families First Act include three changes to Medicaid and CHIP designed to help these programs better protect people and support states in the face of the pandemic. These provisions include:

1. An increase to the federal Medicaid matching rate (FMAP) by 6.2 percent during the COVID-19 public health emergency. Furthermore, the Act provides for state fiscal relief not through an additional increase in the FMAP but through a $150 billion fund for states, localities, and tribes to cover unbudgeted costs incurred due to the COVID-19 public health emergency between March 1 and December 30 of this year.

2. Requires states to cover COVID-19 testing in Medicaid and CHIP without cost-sharing and eliminates the requirement that the COVID-19 tests be “approved, cleared, or authorized” by the FDA in order for Medicaid payment to be made.

3. Provides states with the option to extend Medicaid coverage for testing (and the costs of administration of the test) to uninsured individuals at 100 percent federal expense.

However, to be eligible for the funds, Kaiser Family Foundation recommends “states should not implement more restrictive eligibility standards or higher premiums than those in place as of January 1, 2020, must provide continuous eligibility for enrollees through the end of the month of the emergency period, and cannot impose cost sharing for COVID-19 related testing and treatment services including vaccines, specialized equipment, or therapies”.

Looking ahead, the magnitude of the coverage changes along with eligibility as fiscal impact is expected to be even greater than the Great Recession. During these unprecedented times, it is important for AHCA, the Governor’s office, and CMS to remain in constant communication to make sure Florida is utilizing all available options and state and federal dollars to mitigate the projected $1.07 billion deficit in the Medicaid budget.

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