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UPDATED: General Assembly may have to reopen the budget for Medicaid fix

Rosalind Helderman

The Virginia General Assembly may need to reopen the state's two-year budget to reverse cuts to Medicaid eligibility that appear to violate provisions of the new federal health care law.

Gov. Bob McDonnell (R) said Monday that he no longer plans to lobby Congress to approve an extension of enhanced Medicaid match rates. The state had been hoping Congress would extend the enhanced Federal Medical Assistance Percentages (or FMAP) by six months, which had been extended through the stimulus bill but will lapse on Dec. 31. Extending the enhanced rates by six months would result in more than $400 million in additional federal dollars for Virginia.

The additional Medicaid dollars are tucked into a jobs bill under consideration in the U.S. Senate. But the bill's passage is in doubt and McDonnell said Monday he no longer believes the federal government can afford the additional spending.

That was a reversal in position given that the legislature had indicated when it adopted the budget in March that it was confident Congress would approve the enhanced FMAP money. They included a series of deep cuts to health care in the budget, but assured the public they would use the additional federal dollars, when they were appropriated, to plug the holes.

But here's the new problem: Several of those cuts would reduce eligibility for various Medicaid programs. And the the new federal health care law makes that a no-no. The law, passed at the end of March, has a "maintenance of effort" requirement that explicitly forbids states from reducing Medicaid eligibility.

How big of a problem is this?

According to one state document, the state budget included $20 million to $25 million in savings due to Medicaid eligibility cuts in the fiscal year 2011 and $142 million to $152 million in savings due to eligibility cuts in fiscal year 2012. In other words, it's a pretty big problem.

Assuming the enhanced FMAP is not approved by Congress this year, the General Assembly will have to find a way to rebalance the budget. The Assembly may need to address the hole in the first year's budget at the special session this fall, which McDonnell has said he will likely call to discuss government reform.

"If the FMAP is not received, these cuts just can't be implemented," said Jill Hankin, a staff attorney with the Virginia Poverty Law Center. "It's a legal requirement."

One cut written into the budget--which the feds have now made illegal--was a change to the eligibility requirements for the FAMIS health program for low-income children and pregnant mothers. The budget calls for capping enrollment in the program at 175 percent of the federal poverty line instead of 200 percent. Hankin estimated about 30,000 children and hundreds of pregnant mothers would have been barred from enrolling in the FAMIS if the cut had gone through.

The state budget also envisioned reducing eligibility for the elderly and disabled who receive community-based care rather care at a nursing home. Those services have been limited to those who have income that is no more than $2,220 a month; the budget would have reduced that income cut-off to $1,685 a month.

The budget also would have removed 16,000 aged, blind and disabled Virginians from the Medicaid roles by reducing basic eligibility for the program from 80 percent of the federal poverty line ($8,320 a year) to 75 percent of the poverty line.

These cuts cannot go into effect because of the federal law, Hankin said.

What's the plan for putting the budget back into balance? We'll let you know when we hear from the governor's office.

UPDATE 6:25 p.m.: The governor's office indicates that it may not, in fact, be necessary for the Assembly to reopen the budget to deal with this problem. "Language in the budget authorizes the Governor to transfer money from the second year to the first year in response to federal mandates. This could be dealt with administratively. The governor would certainly work with the leadership of the General Assembly in making any decisions that might be necessary," McDonnell spokesman Tucker Martin said in an email.

By Rosalind Helderman  |  June 15, 2010; 4:08 PM ET
Categories:  General Assembly 2010 , House of Delegates , Rosalind Helderman , State Senate  
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