A Closer Look at the Current Medicaid Deficit
In his State of the State address last night, Governor Walker reiterated that he will introduce a budget adjustment bill to close a deficit in the current fiscal year (2010-11). That budget hole results in part from a shortfall in funding for Medicaid and BadgerCare Plus. (We outlined other factors in Monday’s Budget Project Blog post.)
Last week when Walker first indicated he would propose a budget adjustment bill, he put the 2010-11 Medicaid deficit at $214 million. Fortunately, by Monday when the Legislative Fiscal Bureau released its
report on the status of the state budget, the current Medicaid deficit had declined to $153 million. This blog post summarizes the factors affecting that deficit.
Thanks to the Medicaid shortfall, as well as smaller deficits for the Department of Corrections and Public Defenders Office, the total deficit for this fiscal year will be at least $78 million. However that could climb above $336 million, depending on when the state pays off two large debts (to pay back the medical malpractice fund and the debt owed to Minnesota following revocation of the tax reciprocity agreement).
The current Medicaid shortfall stems in part from the fact that part of the strategy for achieving about $200 million in General Funding savings from the DHS rate reform effort in 2009 was to delay some Medicaid payments until the next biennium. That strategy was nixed by the Legislative Audit Bureau, which said DHS couldn’t unilaterally delay those payments. According to the latest
Fiscal Bureau memo, other factors contributing to the shortfall include the following:
- $16 million for contracted administrative services;
- $5 million to support income maintenance activities, including support for Milwaukee enrollment services; and
- A one-time $9.7 million increase in this fiscal year because the Audit Bureau said certain payments relating to the WI Medicaid cost reporting program need to be made in the current fiscal year, rather than next year.
On the other hand, a number of factors have reduced the size of Wisconsin’s Medicaid deficit, such as:
- The $23.1 million CHIPRA bonus payment received because of the state’s success in increasing enrollment of Medicaid-eligible children;
- $25 million in savings from moving some 2011 payments into 2010, to take advantage of higher cost sharing; and
- $11.9 million set aside by the Joint Finance Committee in mid-December from unalloted funding in the DHS budget.
Many people were expecting the Governor to use Tuesday’s speech to outline his plans for trimming spending for Medicaid and BadgerCare Plus. See, for example, the recent State Journal article, “Walker likely to propose Medicaid changes in State of the State speech,” which discusses some of the potential cost-saving measures. However, the Governor’s address last night was very sketchy. He didn’t even mention Medicaid or BadgerCare Plus (BC+), although he briefly referenced “corrective action” to constrain entitlement spending.
The Walker Administration estimates that Wisconsin will have a $1.8 billion shortfall in state funding for Medicaid and BC+ in the 2011-13 biennium. Most of that, about $1.25 billion, reflects the loss of the higher federal cost-sharing from the Recovery Act, which substantially reduced the state share of Medicaid costs in the current biennium. The rest largely reflects continued caseload growth this year and the general cost increases for health care services, including long-term care for the elderly and people with disabilities.
It appears that we won’t find out for at least a couple more weeks how the Governor will propose addressing the Medicaid/BC+ shortfall. I hope his recommendations include continuing efforts of the Doyle Administration to improve the efficiency of health care system by using rate reform to incentivize services that reduce spending. I also hope Walker will approve the recommendation from DHS last year to expand provider assessments (but I won’t hold my breath waiting for that proposal). Finally, because the growing cost of Medicaid stems in large part from the general cost increases for health care services, the state needs to use the opportunities provided by the Affordable Care Act to create a health care system that slows cost increases for both private and public health care.
Jon Peacock
