Medicaid apparently will be an important component in President-elect Obama’s economic recovery package. In mid-December Mr. Obama declared, “It’s [health reform] not something we can put off because we are in an emergency. This is part of the emergency; Medicaid is a focal point for economic recovery; it is a powerful tool targeted to help economically distressed families and states.

By James D. Chesney

Medicaid apparently will be an important component in President-elect Obama’s economic recovery package. In mid-December Mr. Obama declared, “It’s [health reform] not something we can put off because we are in an emergency. This is part of the emergency”  Medicaid is a focal point for economic recovery; it is a powerful tool targeted to help economically distressed families and states.

Helping Families

Medicaid is a federal state partnership that provides health insurance targeted to poor women, children, elderly and disabled people. Obama’s recovery package would apparently add unemployed to the list of categories covered by Medicaid. Currently, retirees and laid off workers are eligible to continue their employer based health insurance at their own expense once employment ceases.  Under the recovery plan proposal, Medicaid would be used to help cover health insurance for unemployed families. As unemployment rises, so do the number of uninsured. Nationally each percentage point increase in unemployment means another one million more uninsured people. Since Michigan leads the nation with a 9.6 percent unemployment rate, any effort to provide health insurance to unemployed families is critically important. The magnitude of this policy initiative is clear on the 4.5 million American currently collecting jobless benefits, including 473,000 Michiganders.  Medicaid is a powerful tool because helping financially vulnerable families is one of the best way to stimulate the economy and create jobs.

Helping States

State governments are in fiscal crisis. Forty-four states project budget deficits that go as high as California’s 13% percent.  The Center for Budget and Policy Priorities (CBPP) estimates that with the current recession state budget short falls will balloon from an estimated $79 billion in 2010 to 180 billion by 2011.

State budget short falls are not simply an economic issue. Many states have coped with their budget problems by cutting health care to vulnerable citizens. Some examples from the CBPP report:

• Rhode Island eliminated health coverage for 1,000 low-income parents;
• South Carolina is limiting coverage for many services, such as psychological counseling, physicians visits, and routine physicals; and
• California and Utah are reducing the types of services covered by their Medicaid programs. Additionally, the governor in California has proposed cuts that, when fully phased in, would cause more than 400,000 adults to be denied health coverage.
• Florida has frozen reimbursements to nursing homes and relaxed staffing standards,
• Nevada is making it harder for beneficiaries to qualify for nursing home care, and
• Arizona eliminated temporary health insurance for people with serious medical problems.

Medicaid is a very good tool for economic recovery. Medicaid is jointly funded by the state and federal governments. Federal government sets minimum eligibility and coverage standards and states are responsible for administering the program and may provide additional eligibility and coverage. State Medicaid plans are in place and operating in every state in the country. Medicaid is a useful economic recovery tool because the federal government can allocate more funds to state program and be assured that the funds will have an immediate impact on poor families. Medicaid’s target population represents a sector of the population that is highly vulnerable to a recession’s adverse impacts.

In order for Medicaid to help vulnerable families the Obama administration should:

1.    Cover recently unemployed families under Medicaid,
2.    Set the eligibility at 250 percent  Federal Poverty Level (FPL) ,
3.    Provide 100% federal match for this newly eligible population.

All three elements are critical to the success of Medicaid as an economic recovery tool. In the past year 4.1 million people have lost their employer based health insurance coverage.  Not all of these people would be eligible for the Medicaid expansion. Since health care bills can quickly send families into economic collapse, it is vital that coverage be extended to the vulnerable unemployed families. In order to ensure that vulnerable families are protected, it is important to extend eligibility to unemployed families with incomes at 250 percent FPL. In Detroit the median income ($29,109) is 165 percent of FPL. Without a spouse to reduce the expense of child care, a Wayne County family would need 259 percent of the FPL to have a sustainable income.   Finally, since states are in fiscal crisis, they are not able to bear any cost for the proposed Medicaid expansion. In order to work the program for unemployed families must be 100% federally funded.

President Obama’s chief of staff-designate is widely quoted as saying that this economic crisis is an opportunity to enact important policy changes. Medicaid is a good starting point.

Please send comments or questions to jchesney@policyinitaitivesconsultinggroup.com.

REFERENCES
1.  Kevin Slack Necessary Medicine? NYT December 14, 2008
2.  Richard Richtmyer Jobless Systems Swamped Associated Press January 7,2009
3.  Chad Stone Assistance to Hard-Pressed Families is one of the Best Ways to Protect and Create Jobs Center for Budget and Policy Priorities January 9,2009 www.cbpp.org/1-9-09bud.pdf
4  Elizabeth McNichol and Iris Lav State Budget Troubles Worsen Center for Budget and Policy Priorities. December 23, 2008 www.cbpp.org/9-8-08sfp.htm
5  Nicholas Johnson, Elizabeth Hudgins and Jeremy Koulish FACING DEFICITS, MOST STATES ARE IMPOSING CUTS THAT HURT VULNERABLE RESIDENTS Center of Budget and Policy Priorities December 23,2008  www.cbpp.org/3-13-08sfp.htm