Much Smaller Medicaid Deficit Announced Today

Wednesday, January 4, 2012 at 1:41 AM by

$322 Million Reduction in Medicaid Deficit Provides Opportunity to Protect BadgerCare

The state got some very good fiscal news today, in the form of a letter stating that the Medicaid deficit is about $322 million less than previously estimated by the Department of Health Services (DHS). The state share of that reduction is $127 million – which is more than twice the size of the savings that would be realized from the provision in the budget bill that would end BadgerCare coverage of 53,000 adults, beginning in July 2012.

According to the DHS letter made public today, the revised projection results from a combination of factors, including lower-than-expected enrollment in the current fiscal year, lower costs per enrollee, smaller-than-anticipated Medicare Part B premiums (which are paid by Wisconsin for dual enrollees), and a much lower (by $18 million) drug rebate reimbursement to the federal government. (The previous deficit estimate and cost-saving projections can be found here.)

DHS is seeking federal approval for changes that are expected (by the department’s own conservative estimates) to result in more than 64,000 people losing their Badgercare coverage, and which would adversely affect about 270,000 additional BadgerCare participants who would have reduced benefits and higher premiums or co-pays.  The full range of proposed changes to BadgerCare would save an anticipated $116 million of state GPR funds in the current biennium, according to a Fiscal Bureau synthesis of the DHS estimates.

The reduction of the 2011-13 Medicaid deficit by $127 million GPR means that the state could avoid all of the proposed BadgerCare cuts (many of which are unlikely to receive federal approval). However, it appears that the state plans to use some of the newly identified cost savings to cover a portion of the cost of lifting the Family Care cap, which DHS says will cost about $80 million GPR in the current biennium (minus savings form various “efficiencies” in Family Care that DHS says it will implement, but has yet to quantify or specifically identify).

Another option to preclude cutting tens of thousands of people from BadgerCare is to use the CHIPRA performance bonus funds. The state received a $24.5 million federal bonus last week for BadgerCare’s success in enrolling low-income children. The state can expect a bonus of nearly that much next year, meaning at least $45 million is available during this biennium to assist in avoiding BadgerCare changes that would simply shift costs elsewhere in the health care system.

Unfortunately, DHS said today that it wants to proceed with the proposed cuts to BadgerCare, notwithstanding the much smaller Medicaid deficit.  For more on today’s announcement, see Jason Stein’s article in the Journal Sentinel.  See also the WCCF reaction to today’s news.

Jon Peacock

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