LFB Clarifies Effect of ARRA Funds on the Medicaid Deficit, But Newer Estimates Coming Soon

Tuesday, August 31, 2010 at 12:32 AM by

The Legislative Fiscal Bureau (LFB) issued new figures last week relating to the effect of the extended federal fiscal relief for Medicaid on Wisconsin’s Medicaid (and BadgerCare Plus) deficit. The LFB memo clarifies a number of important fiscal issues, but it will be superseded in a couple of weeks by new DHS estimates of the deficit.

The memo notes that the recently enacted federal law extending and phasing out the Recovery Act’s enhanced Medicaid relief for states is expected to yield about $194 million for Wisconsin (plus $1.2 million for child welfare). Working from the last official DHS estimate of the 2009-11 deficit in the state share of funding for Medicaid – i.e., a shortfall of $273 million GPR (estimated in March) – the LFB calculates that the recent Congressional action will bring that deficit down to $79 million. In addition, the LFB expects $21 million of GPR savings in SeniorCare, which could be used to reduce the state’s Medicaid deficit to $58 million.

While those numbers are important, don’t bother trying to memorize them because they are likely to become historical footnotes in a couple of weeks, when DHS issues new estimates of the Medicaid shortfall.

The $194 million of anticipated savings from the Medicaid relief extension is much firmer number, and it’s a little more than DHS estimated a few weeks ago, but well below the estimates made by a couple of national groups. One reason for the difference is because DHS was planning to delay some Medicaid payments until the next biennium. Pushing those payments off for a month or so could help temporarily balance the 2010-11 budget, but it would reduce the spending eligible for the enhanced federal match rate, which is scheduled to end on June 30, 2011.

The Journal Sentinel reported last Friday that the Legislative Audit Bureau has concluded DHS cannot delay Medicaid payments until the next biennium without getting the okay of the legislature. There was a bit of a bit of a kafuffle last week regarding whether the Doyle Administration had been “illegally” planning to delay the payments without legislative approval. That seems to me to be a rather trivial political dispute, since no one expects the Wisconsin Legislature to return this year to address the budget shortfall. Assuming that’s correct, the Medicaid deficit is an issue that will fall onto the plate of the next Governor, making the Doyle Administration’s procedural intentions or preferences an academic point.

On the other hand, whether the payments should be delayed is a very legitimate subject of debate. There is plenty of precedent for such a delay, and it would enable lawmakers to postpone some tough choices. Even though that would increase the state’s already very substantial structural deficit, postponing tough choices is generally the course of action that you can expect lawmakers to take – especially when the issue comes up late in the fiscal year, which severely constrains their options. However, in this instance the opposition to delaying the payments could be louder, since that option has the additional drawback of reducing federal Medicaid matching funds – assuming the enhanced federal match is not extended past June 30, 2011.

We will follow up on the Medicaid deficit in mid-September after new figures become available.

Jon Peacock,
Budget Project Director

Categories: BadgerCare Plus, Blog, Medicaid, Recovery Act | Comments Off on LFB Clarifies Effect of ARRA Funds on the Medicaid Deficit, But Newer Estimates Coming Soon

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