As Obama Pushes For Second Stimulus, Federal Audit Agency Says States Have Only Spent One-Quarter of Funds Set Aside for Them in First Stimulus

December 15, 2009 - 7:05 PM
As President Obama and congressional Democrats push for a second stimulus package, a congressional watchdog finds that states have used less than one-quarter of the economic stimulus money allocated -- for increased health-care costs. 

Medicaid made $19 billion dollars in improper payments in 2008. (AP photo)

(CNSNews.com) –  As President Obama and congressional Democrats push for a second stimulus package, a federal auditing agency is reporting that less than one-quarter of the economic stimulus money allocated for spending by the states has been used--the majority of which went to cover increases in Medicaid. 

In a December report to Congress, the Government Accountability Office said that as of Nov. 27, only $69.1 billion, “or about one quarter of the approximately $280 billion of total Recovery Act funds for programs administered by states and localities had been paid out.

That means that only 24.7 percent of the available funds had been spent by that date. 

Of the money already spent, more than 55 percent of it--about $38.2 billion--was spent on health-care programs. 

The bulk of the money allocated for state use under the American Recovery and Reinvestment Act of 2008 -- the stimulus law -- is to be spent in Fiscal Year 2010, which began on October 1 and ends September 30, 2010. Over that time period, the federal government plans to spend more than $100 billion of the $280 billion. Spending will then decrease each year through 2016. 

However, in a speech last week at the Brookings Institution, a center-left think-tank in Washington, D.C., in which he spoke about the need to create jobs, President Obama presented a package that is being labeled as a “second stimulus.” 

Obama’s plan would include more spending on infrastructure, hiring incentives, and emergency aid to states. The president also proposed spending on incentives for people to weatherize their homes and make energy efficient upgrades. The actions would amount to billions more in spending, but the exact price tag would depend on the specific legislation Congress passes. 

Even without increases to health care subsidies being considered by the U.S. Senate, more than half of the stimulus money already spent for states went to health care. The chief outlay in that sector for 2009 was for increased aid from the Centers for Medicare & Medicaid Services to states with eligible unemployment rates.

The stimulus bill allowed for a 6.2 percent increase in the Federal Medical Assistance Percentage (FMAP), which establishes the level at which the federal government matches state spending on Medicaid. FMAP changes each year.

Total FMAP increases accounted for $22.3 billion of the $38.2 billion in 2009 health-care spending for states.

According to the Department of Health and Human Services, which reports the percentages annually, the federal government expected to match 75.67 percent of Mississippi’s spending in 2010, more than any other state, but that number will increase to 84.86 percent under the stimulus bill. 

The government normally does not match less than 50 percent of a state’s spending. States at that level include New Jersey, Massachusetts and California, but they will all now get a 61.59 percent match under the stimulus bill, according to the GAO. 

The GAO said states reported needing the extra FMAP money just to keep up existing services, and were concerned about “program sustainability” in the future. 

As the population of eligible patients has grown due to the economic downturn, more than half of the states the GAO studied “reported using these funds to maintain benefits and services and to maintain payment rates fro practitioners and institutional providers,” GAO report said.

As a result, the report said, state-level  “concerns about program sustainability persist” and that many state Medicaid programs were considering cutbacks for 2011.

“As for the longer term outlook for their Medicaid programs, the District (of Columbia) and all but one of the sample states reiterated their concerns about the sustainability of their Medicaid programs after the increased FMAP funds are no longer available, beginning in January 2011.” 

“In addition,” the GAO said, “most of the sample states and the District reported that projected enrollment increases and further declines in economic conditions and tax revenues have also contributed to their concerns about the longer-term sustainability of their programs.”

Because of these concerns, 11 states and the District of Columbia reported that they were considering reductions in eligibility, benefits, services and fees to hospitals, doctors and insurance companies in Fiscal Year 2011, the report said. 

According to the Congressional Budget Office (CBO), the health-care reform bill currently being considered in the United States Senate would further increase the number of patients eligible for Medicaid. 

After “scoring” – or analyzing the budget implications -- of  the Senate bill, CBO Director Douglas Elmendorf told Senate Majority Leader Harry Reid (D-Nev.) that under the legislation “there would be roughly 15 million more enrollees in Medicaid and CHIP (Children’s Health Insurance Program) than is projected under current law.”

In a floor statement during debate on the Senate health care bill on Monday, Sen. Roger Wicker (R-Miss.) said the Medicaid expansion would place “an undue burden” on the states.

"(W)e are putting a new burden -- if we pass this legislation unamended, that’s going to be a tremendous burden on our governors,” Wicker said.

Sen. Orrin Hatch (R-Utah) similarly said, “I ask my colleagues, if the Reid bill is signed into law, and the Medicaid expansions go into effect, what will the states do to make their budgets work?

“It will just devastate the states,” Hatch said.