Congress is in the midst of developing a second federal relief bill in response to the devastating economic and health effects of the COVID-19 pandemic. Efforts to finish the bill are being thwarted not only by partisan differences but also by dissent among Senate Republicans. Last Tuesday, Senate Republicans released an incomplete version of their bill, the HEALS Act. Despite consumers’ urgent need for critical health and economic investments, the House and incomplete Senate versions of the second proposed relief bill could not be more different, an indication of how far we truly are from the finished product.

The Senate’s HEALS Act is a call to action for health advocates. Its disregard for economic assistance and health care access for our country’s most vulnerable populations and provider cuts for those who have selflessly and heroically provided care on the frontlines during this pandemic should make this bill a nonstarter. One of the most alarming aspects of the bill is the lack of investments for the Medicaid program.  

How can Congress invest in Medicaid to better support states’ administration of health care services?

To best meet the needs of consumers, health care providers, and states as a whole during this pandemic, Congress should temporarily enhance the Federal Medical Assistance Percentage (FMAP), the federal matching rate for Medicaid spending. In the first federal relief package, Congress increased the FMAP by 6.2 percentage points. With COVID-19 cases continuing to trend upward in many parts of the US and the concurrent economic recession, Congress should enhance the Federal Medical Assistance Percentage (FMAP) by a net 14 percentage points and sustain the match for the duration of the economic downturn.

Increasing the FMAP is critical to states since, unlike the federal government, states are required to have a balanced operating budget. This is a source of strain for states during periods of fiscal stress, as is the case now with the US Bureau of Economic Analysis reporting the “largest single quarterly decline on record for data going back to 1947.” With Medicaid constituting the largest portion of a state’s budget at an average of approximately 29 percent, and without additional federal assistance, states would be forced to choose between prioritizing consumers’ health and avoiding budget deficits.

What are the consequences of failing to enhance the FMAP?

Provider Cuts: Hospitals and other medical centers have taken precautions to limit patient care due to the infectious nature of COVID-19, especially for elective treatments. As a result, health care providers that serve Medicaid enrollees have lost significant revenue. Now, they may also face state cuts to their payment rates due to states’ dramatic budget shortfalls. Because states are given the flexibility to determine how to reimburse providers, states have tended to cut provider rates to reduce costs in past economic recessions. Despite the demand for health care providers in this pandemic, hospitals’ economic restraints may also force them to reduce their staff if Congress does not increase the FMAP.

The response to the recession of late 2007-2009 serves as an example for how the current economic recession should be addressed. Research from 2013 indicated that during this period, people delayed elective surgical procedures. In turn, the average 300-bed hospital lost about $3.7 million dollars. This likely would have been exacerbated if not for the 2009 Recovery Act that established an enhanced FMAP. “The 2009 Recovery Act’s FMAP increases helped 38 states avoid or limit provider cuts in fiscal year 2009 and helped 35 states do so in 2010.”

Inequitable access to coverage and care: Medicaid is a critical coverage program during economic recessions with high rates of unemployment and uninsurance. According to the Bureau of Labor Statistics Employment Report released on July 2, 2020, there are currently 17.8 million unemployed persons. A closer look at the unemployment rates reveals that the LatinX population has faced disproportionate rates of unemployment and pay cuts. This presents inequities in access to coverage since employment and health insurance are closely tied. If states are forced to make cuts to Medicaid, consumers would undoubtedly be most harmed due to threatened access to crucial health services amidst a health crisis.

States have the flexibility to make changes to their Medicaid programs to address state budget shortfalls and could be forced to restrict enrollment for eligible beneficiaries, increase a beneficiary’s out-of-pocket costs, and/or restrict mandatory or optional benefits. These cuts will be particularly harmful for Black and Brown communities who have experienced the worst health outcomes related to COVID-19. People of color disproportionately work in frontline industry jobs, putting them at greater risk of being exposed to the virus, and due to unfair and discriminatory health and economic barriers, they are more likely to have the chronic illnesses that put people at greater risk if they do get sick from COVID-19. During crises such as the current global pandemic, these inequities are exacerbated, leaving communities of color more vulnerable to worsened health outcomes and economic disadvantages.

Congress Must Act Now

Enhanced FMAPs will allow states to preserve health coverage and address massive state budget shortfalls related to the COVID-19 pandemic in an equitable manner. FMAP increases have proven to be successful in past economic recessions to balance state budgets, avoid Medicaid cuts, and maintain eligibility, therefore, preserving access to necessary medical care for consumers. FMAP increases should be a part of Congress’s next relief package to adequately respond to the current health and economic crises.