There is finally some good news with respect to Wisconsin’s Medicaid budget. The Department of Health Services (DHS) reported today that the previously anticipated Medicaid shortfall has been almost completely eliminated.

The department’s previous quarterly report estimated that the state needed to find $93 million of General Fund savings to get the budget for Medicaid and BadgerCare into balance at the end of the 2013-15 biennium. DHS now projects a shortfall of just $700,000. They attribute the very substantial improvement to several factors, including these three:

• $51 million from settlements paid by drug companies, who had been sued for improperly charging Medicaid for some prescriptions.
• Lower than expected average costs for childless adults in BadgerCare because that new group of enrollees has been younger and healthier than anticipated.
• Enrollment in Family Care and IRIS has been growing more slowly than expected.

I’m very relieved that the Medicaid budget appears to be on the verge of being in balance, and I’m also surprised. The DHS budget request for 2015-17 indicates that they now expect enrollment of childless adults in BadgerCare to be 10,000 higher than the department assumed in the quarterly report issued at the end of June. I thought that change would increase the size of the anticipated deficit, but apparently that cost driver has been far outweighed by the other variables.

A lack of detail in the new report is somewhat frustrating. For example, the new DHS document doesn’t say anything about the recent increase in projected enrollment of childless adults, much less provide an estimate of how much that factor will affect costs over the remainder of the current biennium (which ends on June 30, 2015).

I don’t think the good news relating to the current fiscal year has very much bearing on the $760 million shortfall in the next biennium, which DHS projected in their 2015-17 budget request released just two weeks ago. That document already assumed that the 2014-15 Medicaid shortfall would be closed by the end of the fiscal year and wouldn’t be carried forward into the next biennium. It’s unclear to me whether the biennial budget request also accounts for the latest figures indicating lower per person costs for covering childless adults.

In sum, it’s a big relief that deep Medicaid cuts don’t appear to be necessary during the current fiscal year. However, that good news doesn’t change the fact that the state needs to find very substantial cuts or revenue sources during the next biennium. With that in mind, today’s quarterly Medicaid report doesn’t diminish the importance of expanding BadgerCare and accepting federal Medicaid funds to help avoid a large shortfall in the next biennial budget.

Jon Peacock