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Senators negotiate first steps in funding Missouri’s mandated Medicaid expansion

MM Curator summary


Lawmakers are looking for ideas on how to pay for what the voters decided.


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Republican state Sen. Dan Hegeman, of Missouri, discusses voter approval of a ballot measure he sponsored during an interview on Thursday, Nov. 5, 2020, in his state Capitol office in Jefferson City, Mo. 

AP Photo/David A. Lieb

(The Center Square) — Missouri voters in August approved a constitutional amendment that expanded Medicaid despite fierce opposition by the Legislature’s GOP majority and Republican Gov. Mike Parson. 

Now, those same lawmakers and governor must execute the will of the people when they approved Amendment 2 by a 53-percent margin, meaning they must find a way to fund healthcare coverage for an additional 200,000 people now potentially Medicaid eligible this session, which began Jan. 6 and ends May 31.

Amendment 2 expands Medicaid eligibility under the 2010 Affordable Care Act (ACA), which provides a higher federal funding share for states that extend Medicaid to adults earning up to 138 percent of the federal poverty level.

State Auditor Nicole Galloway, the Democratic gubernatorial candidate defeated by Parson Nov. 5, estimates expanding Medicaid under the ACA could cost the state at least $200 million or save it as much as $1 billion annually by 2026.

But it will require upfront investment and some Republicans vow not to fund it. A more common goal among Republicans is to restrict its growth by imposing work requirements and creating a stringent enrollment-verification process.

“Amendment 2 will be a knockout blow to the state budget as more services will be cut or eliminated to pay for the healthcare of able-bodied adults,” state House Budget Chairman Rep. Cody Smith, R-Carthage, said before the session began.

Parson and legislative leaders, however, say they will push for Medicaid expansion as approved by voters less than six months ago under Amendment 2.

As part of that effort, the Senate Appropriations Committee got its first look at a bill that would extend the state’s federal match program — the Federal Reimbursement Allowance (FRA) — for Medicaid payments.

Senate Bill 1, filed by committee chair Sen. Dan Hegeman, R-Cosby, would extend the FRA for another year as state lawmakers have done every year since 2005.

The state’s FRA program was established as voluntary before being enacted into law as a provider tax in 1992. Hospitals contribute to the FRA and Missouri’s Medicaid program — MO HealthNet — uses the funds to earn higher returns in federal matching dollars. 

The FRA has grown to surpass all but two general revenue sources in the state budget. Nearly 85 percent of all payments to Missouri hospitals through MO HealthNet are covered by the FRA.

SB 1 would continue maximizing federal matching dollars and reducing the burden on state general revenues, Hegeman told the panel Wednesday.

“As most of you know, the FRA is how we fund over $1 billion of our state Medicaid program, and it is vitally important to our state budget,” Hegeman said. 

Among extensions is continuing to allow the Missouri Department of Health (DOH) to collect approximately $1.28 billion in Hospital Tax in Fiscal Year 2022 (FY22), which begins July 1, and in FY23. Hospital tax revenues will, in turn, draw approximately $2.391 billion in federal funds each year to the state.

Missouri Hospital Association (MHA) Executive Director Rob Monsees told the panel that adding 200,000 to the state’s Medicaid program will generate “a substantial amount of new FRA dollars. Some of those dollars can help provide an offset to the cost of expansion.”

If SB 1 fails, he said, it “would radically destabilize that funding mechanism.”

Sen. Bill Eigel, R-Weldon Spring, wondered why the FRA is approved each year with little debate when it is one the largest troughs of public money in the state budget.

“The FRA is a mechanism, which (funds) the largest government program we have, sees no reform,” he said. “We have thrown money at a broken program with no meaningful reform whatsoever.”

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