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Funding should reach $100 billion threshold to avoid service cuts

WASHINGTON, DC- Faced with data showing increased demand for Medicaid and state children’s health insurance as more laid-off Americans lose their health insurance, U.S. Senator Bob Casey (D-PA) urged President-Elect Barack Obama to support a minimum of $100 billion in additional Medicaid assistance to the states in the stimulus.

“A perfect storm of state budget shortfalls and job loss is threatening health care for millions of Americans,” said Senator Casey.  “If the federal government does not provide critical Medicaid funding to the states, more states could be forced to cut vital services to the neediest Americans.”

According to the Center on Budget and Policy Priorities, if, as economists predict, the unemployment rate averages nine-percent to 10-percent over the next 30 months, states would see a Medicaid funding gap of $96 billion to $118 billion.  Therefore, to ensure coverage is not threatened for millions of new enrollees as well as current enrollees, a minimum of $100 million in additional Medicaid funding for states is required.

Senator Casey was joined by 13 senators: Daniel Akaka (D-HI), Patrick Leahy (D-VT), Carl Levin (D-MI), Mark Begich (D-AK), Ron Wyden (D-OR), Claire McCaskill (D-MO), Frank Lautenberg (D-NJ), Debbie Stabenow (D-MI), Bob Menendez (D-NJ), Charles Schumer (D-NY), Jack Reed (D-RI), Joe Lieberman (ID-CT) and Jeanne Shaheen (D-NH).

A copy of the letter is attached.


                                                            January 15, 2009

The Honorable Barack Obama

The Presidential Transition Team

Washington, DC  20270

Dear President-Elect Obama:

We write with grave concern about our states’ economic crises.  As you know, states are facing record budget shortfalls – the most recent data released by the Center for Budget and Policy Priorities indicates that at least 44 states are facing budget shortfalls for the current and next two state fiscal years totaling more than $350 billion.  Since they cannot run deficits, states are cutting vital services such as health care for the neediest citizens who rely upon the Medicaid program.  These cuts are occurring as millions of Americans are losing their jobs and health insurance.  State budget cuts deepen the recession and undercut an economic recovery.  

Approximately 60 million Americans, half of them children, rely upon Medicaid for necessary medical care such as basic doctors’ visits, prescription drugs, radiological services, dental care, and hospice care. Cutting these services will most certainly cost lives and will further unravel our already weak social safety net.  Medicaid providers will also suffer significant losses.  

There is no question that we face hard choices in every area of priorities in the economic recovery package.  But various experts have agreed that the hallmark of a good stimulus is that it is well-targeted, temporary and timely.  Fiscal relief through a temporary increase in federal Medicaid payments to the states effectively meets all these criteria.   A number of economists have called for substantial fiscal relief to the states including Mark Zandi, Paul Krugman, Jared Bernstein, and Alan Blinder.  

It is important to note that in 2003, Congress passed a $20 billion state fiscal relief package with money going to states through Medicaid in response to an economic downturn.  The Kaiser Commission on Medicaid and the Uninsured has documented how the temporary increase in the federal Medicaid matching rate provided in 2003 allowed states to avert state Medicaid cuts, and in some cases allowed them to reverse cuts they had previously made. 

States are facing stark choices in budget cuts and tax increases, both of which will drag down the economy further and undercut the very purpose of the stimulus.  We cannot allow this to happen.  One of our most powerful tools is assisting states to maintain their Medicaid services.  

We urge you to include no less than $100 billion for Medicaid funding in the economic recovery package.    

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