Medicaid enrollment expands as state budgets contract

Families USA has preliminary analysis of new Medicaid enrollment due to COVID-19:

As of May 15, 2020, at least 28 states publicly reported Medicaid enrollment data through March 2020 or later months. The analysis compares states’ March, April, and May enrollment levels against their January enrollment levels. Findings show enrollment increases beginning in March or April and then rapidly accelerating. Most states saw modest or no enrollment growth from January to March (0% to 3%), significant increases from January to April (0% to 6%), and massive increases from January to May for those states that have reported (3% to 10%). As a point of comparison, Families USA also analyzed all states based on the Centers for Medicare & Medicaid Services (CMS) monthly enrollment data between January 2019 and May 2019. During that time, a calmer economic period, only two states exceeded 2% growth (Idaho at 2.39% and Vermont at 2.34%), and nearly every other state remained relatively static.

This enrollment increase is happening at a time that state budgets are collapsing.
CBPP reports massive declines in state tax revenue:

CBPP estimates that state budget shortfalls will ultimately reach about 10 percent in the current fiscal year (which ends on June 30 in most states) and more than 25 percent in fiscal year 2021 based on recent economic projections.

Medicaid is a joint federal-state financed program. The federal government does not have a balanced budget constraint and can cheaply access extremely deep capital markets. States can’t do run large operating deficits. They are pro-cyclical accelerators while the federal government can, if our political leadership so chooses, be a counter-cyclical balancing force.

We don’t know how expensive the new enrollees will be. We know that people who, in normal non-pandemic times, experience an insurance transition have a short term utilization spike. We can’t assume that will hold in COVID-19 as both the medical system effectively closed for six weeks and is still down 30%. We can also suspect that the characteristics of new enrollees in the COVID environment is systemically different than new enrollees in 2019. This is an aim of a project I’m drafting at the moment.

But with all of that said, Medicaid is going to be more expensive for states at precisely the time that states have no uncommitted free cash flow.

The Federal government is helping to some degree. The 2nd COVID relief bill increased the federal share of legacy Medicaid spending by 6.2% points. However state budgets will still get squished and that means even as need increases, services are likely to be cut.