Key point: During the novel coronavirus outbreak, the burden on public health systems in states experiencing severe outbreaks could make these financial pressures even worse.
Among the four of us, one of us served in President Trump’s administration and two of us served in President Obama’s administration. Two of us are doctors and two of us are economists. All four of us strongly believe that one of the many critical steps Congress should take to slow the spread of the COVID-19 disease, help the families and communities most affected by it, and aid the overall economy would be to increase the federal matching rate for the Medicaid program.
Currently, the federal government pays about 60 percent of the cost of Medicaid, over 70 percent of the cost of the Children’s Health Insurance Program, and 90 percent of the cost the Medicaid expansion population, with the remaining costs paid by states. In a normal economic downturn, states face budget constraints as their revenue falls, forcing them to cut back on Medicaid and other spending to meet their balanced budget requirements. During the novel coronavirus outbreak, the burden on public health systems in states experiencing severe outbreaks could make these financial pressures even worse. That is why Presidents Bush and Obama both signed increases to the federal share of Medicaid, the Federal Medical Assistance Percentage (FMAP), to help fight the last two recessions.
Today the need for increasing the federal share of Medicaid is even more urgent and important than it was when Presidents Bush and Obama did it. State spending needs are mounting rapidly as they are forced to shoulder a substantial share of the burden of the response to the spread of COVID-19. As consumers pull back on spending, sales tax revenues will start to fall. Now is not the time for states to cut back on public health efforts, support for communities, or treatments for the sick. Raising the FMAP will allow states to immediately address public health needs, make it possible for states to use Medicaid to cover COVID-19 related needs, prevent states from reducing eligibility in the middle of a public health crisis, and would also provide macroeconomic stimulus by preventing contractionary cutbacks by states affected by the virus.
Jason Furman is a professor of the practice of economic policy at Harvard University and was chairman of the Council of Economic Advisers (2013—2017). Scott Gottlieb is a physician and a resident fellow at the American Enterprise Institute, and was the commissioner of the Food and Drug Administration (2017—2019). Kavita Patel is a physician and fellow at the Brookings Institution, and was director of policy for the White House Office of Intergovernmental Affairs and Public Engagement (2009—2010). Michael R. Strain is the director of economic policy studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.
Their article first appeared in AEIdeas.
This article is being reprinted due to reader interest.