Medicaid Budget Doesn’t Reflect ACA Measures and Is Likely to Change Substantially by January

The Department of Health Services and other state agencies submitted their budget requests to the Dept. of Administration on Monday.  All or nearly all of those requests can now be found on the DOA website.

In a cover letter to DOA, Secretary Smith refers to the DHS request as a “starting point.”  I think that’s an apt description because the Medicaid budget is likely to be revised significantly after the November elections. The DHS proposal does not include any of the costs and benefits related to implementation of the federal health care reform law, and it doesn’t propose any changes in eligibility or major cost-cutting initiatives, although it does include several proposals to reduce spending. Despite those measures, such as a new data match to verify residency, it would increase state GPR spending by $647 million over the next biennium.

There are a few elements of good news in the DHS document. For one, the department indicates that Medicaid costs are growing more slowly in Wisconsin than in the U.S. as a whole.  Also, the total cost increase for essentially maintaining the status quo is somewhat less than I had expected, with “all funds” spending rising by 4.2 percent the first year and 3.1 percent the second year.Unfortunately, the requested GPR funding goes up much faster than the total, because the federal share of the state’s baseline spending for Medicaid will shrink, as a result of higher income in Wisconsin. That single factor increases the requested GPR spending by almost $200 million, which helps boost the total GPR increase to $647 million over the base budget.

The magnitude of these numbers highlights the importance of making fundamental health care reforms, such as changes now being piloted under the Affordable care Act, which can control costs while also improving quality.

Some of the DHS budget assumptions and estimates deserve mention:

• The moratorium on new enrollment of childless adults in BadgerCare Core would be continued through both the current biennium and the next one. That moratorium was supposed to be a temporary measure when it was imposed three years ago.
• The cost-savings changes to BadgerCare that were initiated in July are expected to reduce BadgerCare enrollment by roughly 21,500 adults by the end of the current fiscal year, which is a larger decline than we had estimated based on previous DHS documents.
• BadgerCare growth will resume at a modest rate in the next biennium – with annual increases of 1% for adults and 1.2% for children.
• Medicaid enrollment of the elderly and people with disabilities is expected to increase by 2.7% each year.
• Continued growth in Family Care participation is expected to increase GPR spending by $43 million in the first year and $77 million the second year, relative to the FY 2013 level (which will be about $32 million above the budgeted amount for the current fiscal year); however, those figures don’t account for savings from the department’s long term sustainability initiatives.

Read more about the DHS budget request in Patrick Marley’s article in the Journal Sentinel.

Jon Peacock