Grassley, Harkin both disappointed with Medicaid stimulus

While ultimately casting opposing votes on the federal economic stimulus package, U.S. Sens. Charles Grassley and Tom Harkin agree that the newly conceived formula used to distribute the $87 billion Medicaid portion of the bill shortchanges Iowa.

The Medicaid program provides medical insurance to low-income Americans. From the total Medicaid disbursement, it is estimated that $550 million, or less than 1 percent, will be received by Iowa if the existing compromise version of the stimulus is approved. (The U.S. House passed the compromise legislation on Friday afternoon, and the Senate is expected to vote as early as tonight.) The formula, which is based on state income levels, gives each state a 6.2-percent increase while allowing additional dollars based on unemployment growth rates.

Grassley, who offered an amendment that would have given all states an across-the-board 9.5-percent increase in federal Medicaid payments, described the processes as “skewed.” The amendment was dismissed by the U.S. Senate on a 47 to 49 vote. Grassley, a Republican, and Harkin, a Democrat, both voted in favor on the amendment.

“The bias in the Senate bill was bad, and it’s even worse in the final product,” Grassley said in a statement.

The redistribution mandated by Grassley’s amendment would have given Iowa and 33 other states larger portions of the Medicaid funds and reduced the disbursements to larger states such as California and New York. If the amendment had passed, Iowa would have received an estimated $735 million in new Medicaid funds.

“[The formula] disregards the tough economic situation facing our state and others, and it fails to understand that the recession is hitting places like Iowa a little later than other states, but it is still hitting us,” Grassley said.

While Harkin would have preferred passage of Grassley’s amendment, he voted for the bill in part because he believes something was better than nothing.

“…Iowa will still receive an additional $550 million in Medicaid assistance,” spokeswoman Jennifer Mullin said. “Senator Harkin believes that this assistance — particularly when combined with the other crucial funding in the recovery act, including for rural development and infrastructure — will help Iowa during these challenging times.”

The proposed package mandates 65 percent of the Medicaid dollars to be distributed to states under current formulas, which are determined by looking at a three-year average of per-capita income in each state. The remainder will be distributed based on the unemployment rate growth of the individual states. Although the U.S. House version allowed states to expand Medicaid coverage to recently unemployed workers, the compromise bill does not contain this provision.

Because the federal formula looks at a three-year average of per-capita income, critics have argued that it does not reflect current realities facing the states, which prompted Congress to debate and include the unemployment growth stipulation.

It’s a double-edged sword for Iowa. Because smaller and more rural states tend to have lower incomes, they automatically receive smaller federal matching for every dollar they spend on Medicaid. States with high unemployment rates like California and New York already have high federal matching percentages.

The end result is that every dollar that Iowa spends on Medicaid programs receives a much smaller match than every dollar spent by larger states with traditionally larger incomes and higher unemployment rates.

Medicaid funding distributed to the states is also somewhat tied to the Medicare program. That is, Medicaid cannot pay more for services than Medicare would. Because Iowa is reimbursed by Medicare at one of the lowest rates in the nation, this impacts not only the state’s Medicaid program, but health professionals, hospitals and the overall state economy.