Nearly all states have enacted FY 2022 budgets with several notable themes emerging. States invested in health care through both Medicaid expenditures and state general funds.
“The increased federal funds that are flowing to states under the various federal actions during the public health emergency (PHE) are helping most states’ budgets,” according to Leesa Allen, director at Sellers Dorsey, an America’s Essential Hospitals corporate affiliate member. “However, because Medicaid programs continue to make up the majority of programmatic costs, states are cautiously considering how they prepare their budgets.”
Medicaid rate changes, equity initiatives, mental health and substance use disorder funding, graduate medical education (GME) initiatives, and continued funding for COVID-19 relief all feature prominently in many state FY 2022 budgets.
Medicaid Rate Changes
A few states have specified Medicaid rate changes for FY 2022 budgets. Colorado and South Dakota will increase reimbursement for all Medicaid providers. Maryland will increase rates for most providers, while Nebraska will increase rates for inpatient and outpatient services for two years.
Multiple states included budget-line items to fund equity improvement work, which is a major priority of the Biden administration. The funding amounts differ in size and scope, for example:
- California is annually investing $115 million of the Department of Public Health budget in community-based equity and racial justice efforts and $63.1 million in a one-time fund to support the California Reducing Disparities Project, which provides prevention and early intervention efforts related to mental health for marginalized populations;
- Colorado’s Medicaid program invests $6 million for data sharing and analytics to address health disparities among Medicaid patients and $5 million for a health equity grant program distributed through the state Department of Public Health and Environment. The new program will distribute funds to community organizations to address root causes of health inequity, such as access to healthy food, housing, and physical activity; and
- Florida allocates $9 million to the state Office of Minority Health and Health Equity to develop strategies to advance health equity and reduce disparities.
In contrast, Oklahoma reduced Medicaid spending for the state Department of Mental Health and Substance Abuse Services by $13 million. The state plans to use additional federal funds from Medicaid expansion to help support behavioral health care in the state.
Two states invested in efforts to improve GME. Arizona increased Medicaid GME spending by $3 million, allocating a total of $6 million in funding for FY 2022 and $9 million per year thereafter. Rhode Island allocates $10.6 million of general fund dollars to restore supplemental payments to community hospitals, including GME programs.
The pandemic continues to affect the health and the economies of all states. All states will continue efforts to combat COVID-19, but a few states have highlighted Medicaid budget-line items specifically related to the PHE:
- Illinois will automatically extend Medicaid eligibility to any resident determined to be eligible during COVID-19 for up to 12 months following the end of the PHE;
- Nevada allocates $2.83 billion for the state’s COVID-19 relief programs, including immunizations, communicable disease initiatives, health care facilities, emergency preparedness, and more;
- Tennessee includes $150 million for the COVID-19 response to cover various health programs; and
- Washington’s Medicaid budget includes $65 million to continue providing rate add-ons through the end of calendar year 2021 for contracted service providers offering services related to the COVID-19 pandemic.
Mental Health and Substance Use Disorder Funding
Many states increased Medicaid funding to support mental health and substance use disorder treatment, including Indiana, Kansas, Florida, Louisiana, Massachusetts, Minnesota, North Dakota, New Hampshire, New Mexico, Oregon, South Dakota, Tennessee, Utah, and Wisconsin. Several states also added funding for school districts to address mental health care.
Other Notable Budget Decisions
Several other changes in state budgets will affect hospitals and the Medicaid program:
- New Hampshire allocates $6 million in Medicaid funds for new transitional housing beds;
- Ohio establishes new licensure requirements for hospitals, effective by July 2022, requiring disclosure of all hospital locations and number of beds in the facility and calling for on-site inspections every three years;
- North Dakota allocates $8 million more in funding to hospitals in the Medicaid program; and
- Vermont will provide health care coverage to pregnant people and children who do not qualify for Medicaid due to immigration status.
“In the months ahead, it will be interesting to see how federal and state health care policy reforms impact safety net hospitals around the country,” says Scott Allocco, a director at Sellers Dorsey. “One area to watch is whether the public option initiatives, such as those in Washington and Colorado, expand into other states. Given that these public option programs primarily control costs by lowering payments to hospitals, typically to Medicaid or Medicare levels rather than commercial rates, these initiatives will be important for safety net hospitals to track closely.”