Lawmakers in Virginia and Maryland are bracing for a congressional impasse over millions of dollars in health care funding that threatens to thrust both states into the red.
The Medicaid funding is set to expire in January, and a measure to extend it is stalled in the Senate over concerns about the ballooningfederal deficit.
Virginia lawmakers created a plan for $430 million in cuts through fiscal 2012 if the extension isn’t approved. But roughly one-third of those cuts hinges on reducing Medicaid eligibilty, which the new federal health care law makes illegal.
Maryland is facing an even larger deficit, because Gov. Martin O’Malley built the state’s $389 million in federal funding into the fiscal 2011 budget.
O’Malley plans toshore up the loss by raiding a $200 million state surplus expected in fiscal 2011 and draining the rest from the local income tax reserve — marking the third consecutive year the state has tapped the fund.
Maryland Comptroller Peter Franchot identified the reserve as a funding source in 2009, “but he didn’t envision it as an ongoing [funding] option, and he would have some concerns with that,” spokesman Joe Shapiro said.
The Maryland legislature emptied $350 million from the reserve to close a budget gap last year, and lawmakers this year approved another $350 million drawdown to fill the state’s Education Trust Fund.
Virginia also is planning to push its potential Medicaid shortfall into the future.
If the federal grant doesn’t pan out, Virginia won’t be able to follow through with more than $160 million in cuts that would violate the new federal legislation. Lawmakers would take money from next year’s budget to partially fill the hole, said Bill Hazel, Virginia secretary of health and human resources.
Cuts Virginia could legally enact would fall primarily on physicians, hospitals and poor families, health experts say.
The state’s plan to cut physician reimbursement by 3 percent would drive doctors out of the Medicaid program, said Jill Hankin, a lawyer for the Virginia Poverty Law Center.
“Individuals won’t be able to access the care they need because there won’t be enough providers,” she said.
Advocates for low-income families warn that Medicaid recipients will skip the doctor’s office and head directly to the more expensive emergency room.
Still, Virginia is better off than Maryland, Hazel said.
“We did a very smart thing in Virginia and we did not count the money before we had it,” he said. “Maryland has a problem because they counted their chickens before their eggs hatched.”
