Letter to Finance Committee Says Medicaid Deficit Has Essentially Been Erased

A December 28 letter from the Department of Health Services (DHS) provides good news on the status of the Medicaid/BadgerCare budget and sheds a little light on the effects of the BadgerCare premium increases that were implemented in July. The letter, which was sent last Friday by Secretary Smith to the Joint Finance Committee, is the latest quarterly update regarding the department’s efforts to eliminate the Medicaid deficit.

As I explained in a Wisconsin Budget Project blog post, DHS now estimates that the Medicaid budget is essentially in balance – with just $300,000 more in state GPR savings needed to fully close the gap. The latest improvement in the Medicaid budget is primarily because of a decrease in the capitated reimbursement rates for Family Care, PACE, and Partnership managed care organizations.It appears that the Medicaid deficit has been eliminated without crediting to the Medicaid budget any of the following sources of funding that could be used for that purpose:

• The $24.5 million CHIPRA performance bonus received in December 2011.
• The $8.7 million supplement to the 2011 bonus that was received in the fall of 2012.
• The $23.3 million performance bonus received in December 2012.
• More than $10 million received by the state from a number of legal settlements with drug companies.

The $24.5 million bonus received in 2011 was lapsed to the General Fund, and that may be the Walker Administration’s intent for the more recent bonus awards. The DHS letter does not mention any of those funding sources.

One interesting aspect of the letter is that it provides some data on the adults who have been disenrolled from BadgerCare for nonpayment of the new or increased premiums, which were changed in July 2012. According to the DHS data, there were 11,162 adults who lost coverage for nonpayment during the three-month period of July through September. That amounts to 23% of the 48,835 adults subject to premiums in July 2012.

In Secretary Smith’s testimony last month to a House subcommittee, he made much of the fact that higher income BadgerCare participants, over 200% of the federal poverty level (FPL), were much more likely to be disenrolled for not paying a premium than lower income enrollees. The data in the Dec. 28 letter illustrate the point – showing that 52% of adults between 200% and 300% of FPL dropped out for failure to pay a premium, compared to 18% of adults between 150% and 200% of FPL.

The explanation for this seems pretty simple. The adults in BadgerCare who have income over 200% of FPL and are affected by the July changes are all in Transitional Medical Assistance (TMA), and that group previously had no premiums. Some of them probably have offers of employer coverage. Applying premiums for the first time to adults who may be able to get employer coverage is bound to cause a larger drop in enrollment than an increase in premiums for a lower income population of adults who are already used to paying premiums and who wouldn’t be eligible if they had access to affordable employer coverage.

The effect of increased cost-sharing is a very important topic, and I appreciate the department’s interest in monitoring the impact on enrollment. I’ll look at the issue more carefully after we’ve had an opportunity to analyze additional data.

Jon Peacock