DPW Concerned Over the Future of the Federal Medicaid Funding Match

HARRISBURG – Acting Secretary from the Department of Public Welfare Beverly Mackereth has sent a letter to the four Appropriations chairmen in the legislature expressing concerns over the future of critical funding for the Medicaid program.

The letter notes that the U.S. Department of Health and Human Services (HHS) is considering national policy changes that may negatively impact the commonwealth’s current Medicaid program and fiscal stability and reduce any savings the commonwealth may realize if it were to choose to expand Medicaid in Pennsylvania.

Specifically, the department is concerned that the federal government may discontinue or significantly reduce the amount that the state can leverage as a result of imposing a gross-receipts tax (GRT) on managed care organizations. Currently, the state takes the tax revenue from the GRT and has an agreement wherein that revenue is leveraged to increase spending in Medicaid. If the federal government reduces or takes away that ability to draw down additional funding, it could mean up to $1.53 billionless for Medicaid in Pennsylvania over 7 years if the state were to choose to expand the program.

To date, HHS has only indicated that it will be addressing the issue through “national guidance” and will initiate conversations with Pennsylvania after releasing that guidance.

Mackereth notes that third-party reports touting the savings under expansion of the Medicaid program utilize and assume all of these dollars for their savings calculations. Advocates claim these taxes could pay for expansion.

“I’m very concerned that not everyone has the facts, and this includes the fact that over a billion dollars for our Medicaid program is in doubt,” Mackereth said. “That’s why we continue to push for full clarity from the federal government before we make any decisions about the future of the Medicaid program here in Pennsylvania. It just makes sense.”

While not included in the letter, the department is also concerned over the hospital quality care assessment, a 2.95 percent tax on the net inpatient revenue of approximately 180 healthcare facilities, another avenue for leveraged federal funding.

The GRT and the hospital assessment will provide more than $100 million in the coming fiscal year, which can then be used to draw down another $131 million in federal funding based on the current match rate.

“These dollars could be in jeopardy,” Mackereth continued. “It’s critical that we receive more direction from the U.S. Department of Health and Human Services before we count on this funding coming in the door indefinitely.”

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