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A painful recession

Posted by: Angela Shubert on Dec 11, 2008

As families crunch numbers tofigure out how they're going to make ends meet during this recession, state governors are crunching numbers for theirbudgets next year and realizing that they are going to come up short.

Forty-three states expect to seebudget shortfalls in the coming year. And, while the federal government can runa deficit, most state governments are required to keep a balanced budget. As aresult, 18states and DC have already cut or are proposing cuts to their Medicaid andCHIP programs. Cuts in state Medicaid and CHIP eligibility and services pose areal threat to the very families and individuals who most need the help.

At the National GovernorsAssociation meeting in Philadelphia last week, governors from both sides of theaisle pleaded with President-Elect Obama to include at least $40 billion forMedicaid in the economic recovery package that is expected to be signed shortlyafter Inauguration Day (January 20). The $40 billion would come in the form ofa critically important federal match increase to the funds that states allocateto their Medicaid programs. As pointed out in a recent WashingtonPost article,

On average, the federal government pays 57 percent of Medicaid costs, and states cover the rest. That means for every $1 a state trims from its Medicaid budget, more than $2 is lost in health care services. Conversely, pumping money into Medicaid "has a double impact."

But increasing federalfunding for Medicaid actually has an even greater than "double impact." That'sbecause in addition to helping states pay for extra Medicaid costs, federalfunding for Medicaid will also give state economies a jump start by generatingnew jobs, wages, and business activity. In other words, putting more federalmoney into the Medicaid program will help state economies move out of recessionand back into the black.

Increasing the federal shareof Medicaid has a proven record of fueling the economy. During the lasteconomic decline in 2003, Congress made a similar move, and the KaiserCommission foundthat the additional money "helped states to both balance their budgets andmaintain eligibility." For analysis of how much the latest congressionalproposal would help state economies, see Families USA's new report, APainful Recession.

When the economy slows, moreindividuals and families enroll in Medicaid. With over a million peopleat risk of losing Medicaid or CHIP due to proposed cuts, states cannotafford to wait any longer for federal help. Including additional federal moneyfor state Medicaid programs in the economic recovery plan will enable states tocontinue their programs without having to cuteligibility or services.  

And during such tougheconomic times, that's news that both families and state legislatures can feelgood about.