Challenges for State Medicaid Budget Grow again in Third Quarter
Cost Growth Underscores the Value of Accepting Federal Funds for BadgerCare Expansion
The latest quarterly report on the state Medicaid budget, issued this week by the Department of Health Services (DHS), reinforces our concerns about the choice of Wisconsin lawmakers to spend substantially more for BadgerCare and insure far fewer people than if the state expanded eligibility to cover additional low-income adults.
The new report reveals a $24.8 million net increase in projected Medicaid and BadgerCare spending in the current fiscal year, relative to what DHS estimated just three months ago. Despite that increase in program costs, the department says the Medicaid budget remains in balance because they plan to more than double the amount of drug settlement funds allocated for the Medicaid budget. (That funding comes from payments by manufacturers to settle lawsuits alleging they improperly charged for medications used by Medicaid recipients.)
The jump in Wisconsin’s Medicaid costs does not come as a big surprise – considering the rapid growth in BadgerCare enrollment of childless adults, which is now almost 60% above the level that DHS originally expected it to reach at the end of the current fiscal year. Childless adult enrollment surged by a surprising 10% in just the first two months of 2015. That fact and the new spending figures strongly suggest that the state would save considerably more by accepting federal funds to finance childless adult coverage than the Fiscal Bureau estimated in early February (when the LFB projected net savings in 2015-17 of $345 million).
It should be noted that the new quarterly report says that the growth in childless adult enrollment is not the only factor in the increase of almost $25 million in the state share of Medicaid spending. Unfortunately, the DHS report doesn’t break out the relative contributions of different factors in the increase (which also include higher spending for certain fee-for-service care, and “reduced federal spending for certain services”).
I applaud DHS and the Governor for their willingness to allocate $46.8 million from drug settlement funds to close the hole in the state’s Medicaid budget for 2014-15; that is a logical short-term solution under the current circumstances. However, using the one-time drug settlement funds, when we could have been tapping the federal Medicaid expansion funding, also has significant drawbacks:
- It provides just a temporary patch to the Medicaid shortfall (thereby increasing the state’s “structural deficit”), while obscuring the need for an ongoing revenue source.
- It draws down a source of revenue that state policymakers may have preferred to use either to close a likely hole in the broader budget for the current fiscal year, or to carry forward to help close the budget gap in the next biennium.
It’s ironic that some state lawmakers have argued that if our state tapped its share of federal funding for Medicaid expansions we would be relying on a potentially unstable source of revenue that Congress and the next President might end. In lieu of tapping that revenue source, our state has a growing shortfall in the Medicaid budget and is closing that shortfall with a one-time source of revenue.