JACKSON – If Gov. Haley Barbour makes more budget cuts, as he said he “likely” will be forced to do, he will face a dilemma with Medicaid.

On one hand, if he doesn’t reduce state spending on the program, other agencies will have to absorb the cuts required by law; if he does trim Medicaid, the state will lose out on a hefty match of federal money.

“If we cut it, you lose not only the state share, you lose the federal match, which right now is about 6 to 1,” the Republican governor said recently.

With revenue collections running below forecasts, Barbour is being forced to trim agency budgets. The first round came Sept. 3, when education absorbed the biggest blow.

Medicaid was left untouched then; whether it stays that way is unclear.

During a recent interview, Barbour expressed concerns about cutting Medicaid during the current economic woes. And he questioned whether he could even cut Medicaid under the federal stimulus package rules, since the program is receiving some of those funds.

To receive stimulus money, states must make commitments not to cut certain levels of services.

Medicaid is a federal-state health care program for about 600,000 elderly, disabled and poor pregnant women and children. While both the state and federal government fund Medicaid, Mississippi receives the best federal match rate in the country because of the high poverty rate here.

More federal money

Normally, the federal government puts up 75.84 cents of each dollar spent on Medicaid, with Mississippi providing the rest. But through December 2010, thanks to the American Recovery and Reinvestment Act passed earlier this year by Congress, the federal government puts up 84.24 cents of each Medicaid dollar spent.

That literally means hundreds of millions in extra federal dollars for health care under the $5 billion program.

But if the governor cuts the amount of state money spent on Medicaid, he would create a double whammy. With less state money going to Medicaid, fewer federal dollars would be drawn down.

“Forty-nine other states are paying us 84.24 cents on each dollar for health care,” said House Public Health Committee Chairman Steve Holland, D-Plantersville. “That is a pretty good health care program for Mississippi – better than Obama’s.

“If Haley wants to cut it, the Lord be with him.”

Barbour said he did not want to make the cuts, but he pointed out that state law requires him to do so if state tax collections come in below the official estimate. The official estimate represents the amount of money used to construct the budget passed by the Legislature and signed into law by the governor.

Earlier this month, after only two months of tax collections for the current fiscal year, Barbour announced cuts totaling nearly $172 million because revenue collections already are $31.7 million, or 5.25 percent, below the estimate.

Barbour exempted Medicaid from the first round of cuts.

But if tax collections do not improve, he said, a second round of cuts is likely. If tax collections continue at the current pace, he estimated additional cuts totaling $100 million.

Under state law, the governor cannot cut any agency more than 5 percent until he cuts all agencies 5 percent. The governor already has made cuts totaling 5 percent in education, representing $158 million of the $172 million in cuts.

The question is whether he can cut another $100 million out of the budget while still exempting Medicaid. He cannot dip into education any more until he cuts other agencies, like Medicaid, 5 percent. Together, funding for Medicaid and education – kindergarten through university level – make up more than 80 percent of the budget.

“I’m not sure we can get that much out of the budget without cutting Medicaid,” Barbour said. “It would be a close issue.”

On top of other problems, said Francis Rullan, a spokesman for the Division of Medicaid, any cuts would come at a time when the number people on the health care program is increasing.

“The more the economy goes south, the more people need benefits,” he said. “If you cut benefits now, it would have even more of a negative impact because of the rotten economy.”

Barbour has said that if Medicaid cuts became inevitable, he likely would reduce reimbursement rates to health care providers rather than reduce the amount of services to recipients. But he acknowledged that cutting reimbursement rates might mean few providers would be willing to treat Medicaid recipients.

Senate Public Health Committee Chair Hob Bryan, D-Amory, said cutting Medicaid would hurt the economy.

“Right now the federal match is 6 to 1,” he said “If you cut Medicaid, you are taking that money out of the economy during a time in the cycle when we need to be putting money in the economy.”

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.