ugust 12, 2020
While recent Executive Orders issued by the Trump Administration do not speak specifically to mental health and substance use disorder services, several of the Orders (if implemented as described) would put additional stress on already decimated state budgets that could trickle down and impact safety net providers.
The article below mentions that Trump Administration officials are said to be authorizing up to $44 billion from FEMA to pay for a $400/week supplemental unemployment benefits order and that the Order would require states to pay 25% of the cost of the extension of these benefits.
Recently we searched for and found data that looks at how much of the total amount of CARES Act funding individual states have spent (to date). New York is one of handful of states that has spent more than 50% of what it has received but the National Governors Association has stated that states are not able to spend more of their total allocation of funds because they are waiting for guidance on how they can spend the funds from the Treasury Department.
The longer the standoff in Washington continues without a new emergency stimulus bill that includes substantial additional funds for states and localities the worse the situation becomes and the greater the risk to the state’s Medicaid Program although there would be significant restrictions on how and where the state could cut the Medicaid Program leaving provider rates exposed as one of the areas that could be reduced. Based on federal Maintenance of Effort requirements that come along with the enhanced FMAP funds states are currently receiving, New York would not be able to restrict eligibility, increase premiums or kick beneficiaries off of Medicaid, leaving provider rates ripe for the picking.
New Trump unemployment plan could squeeze state budgets, Medicaid rates
RACHEL COHRS, Modern Healthcare, 8/12
If President Donald Trump’s plan to extend additional unemployment benefits further squeezes state budgets already ravaged by COVID-19, states could look to Medicaid as a way to cut costs. Provider rates are one area that could be impacted by the additional squeeze
Trump’s plan via executive order appears to be a double whammy for states. States may now be on the hook for unemployment benefits that until now had been paid by the federal government, and the orders put a screeching halt to negotiations over a congressional deal that could have included more funding or flexibility for states. If things don’t improve, states may have to look to Medicaid to close gaps. Prior restrictions mean some of the only options states are left with to balance Medicaid budgets are cutting provider rates or increasing provider taxes. Provider rate cuts are an area of focus because federal matching funds limit state Medicaid programs’ ability to restrict eligibility, increase premiums, or kick beneficiaries off of Medicaid rolls. That leaves states limited options to control spending in Medicaid, one of states’ largest expenses.
The Executive Orders issued by the Trump Administration are very likely to be challenged in the courts but what isn’t clear is whether any court in the country has the authority to overturn or ‘stay’ the implementation of the Executive Orders.
Manatt Health counsel Allison Orris said that Medicaid provider rate cuts could be especially harmful in a public health emergency because they would target safety-net providers serving the most vulnerable.
“The administration is throwing states a big curveball and adding another budget item as they are struggling to prioritize spending on healthcare and other needs,” Orris said.
After negotiations between Democratic congressional leaders and administration officials fell apart last week, Trump signed an executive order authorizing up to $44 billion from the Federal Emergency Management Agency’s Disaster Relief Fund to provide a $400 per week supplemental unemployment benefits, but states would be on the hook for 25% of the bill.
Many details of the program remain unclear including its feasibility for states to administer, what happens when federal funds run out, whether states could opt out of the program, and whether states could request to have their portion of fees waived.
Even with the uncertainty, some governors have said their states can’t afford the 25% contribution. National Governors Association Chair New York Gov. Andrew Cuomo (D) and Vice Chair Arkansas Gov. Asa Hutchinson (R) issued a statement of on Monday voicing concern about “the significant administrative burdens and costs this latest action would place on the states.”
“The concept of saying to states, you pay 25% of the insurance, is just laughable,” Cuomo said during a news conference. “It’s just an impossibility. So none of this is real on the federal side. This is going to have to be resolved.”
The Trump administration cited a recent watchdog report that showed states haven’t spent roughly half of the $150 billion in state and local government assistance funds from the CARES Act, and said states should use that money to fund the new benefit.
But the NGA and other organizations representing local governments said the report failed to account for funding that is allocated but not technically spent yet, and that the Treasury Department didn’t finalize guidance on spending the funds until the end of the reporting period.
If states have to come up with the funds somehow and don’t get additional assistance from Congress, the unemployment program creates a new budget line item.
“It undercuts existing fiscal relief and puts even greater pressure on healthcare programs like Medicaid and CHIP, which makes states more likely to cut, including provider rate cuts,” Center on Budget and Policy Priorities Vice President for Health Policy Edwin Park said.
Provider rate cuts are an area of focus because federal matching funds limit state Medicaid programs’ ability to restrict eligibility, increase premiums, or kick beneficiaries off of Medicaid rolls. That leaves states limited options to control spending in Medicaid, one of states’ largest expenses.
The providers that would be hardest hit by Medicaid provider rate cuts are the safety-net providers that serve vulnerable populations and generally operate on thinner margins anyway, Manatt’s Orris said.
The situation could get worse the longer the economic downturn lasts, and as some states burn through the reserve funds they had built, said National Academy for State Health Policy Executive Director Trish Riley said.
“It’s really the perfect storm for states, states now facing rolling back revenues,” Riley said. “They have to balance budget, with few choices and Medicaid is often the second biggest part of budget.”