New LFB Paper Makes Stronger Case for Taking Federal Medicaid Funds

Monday, May 18, 2015 at 7:23 PM by

Increase in Childless Adult Enrollment Boosts Costs and Potential Savings  

The number of childless adults participating in BadgerCare is now expected to be about 6,800 per year higher than the budget bill assumed, which means the cost of not accepting enhanced federal assistance for covering that population is also considerably higher. 

A paper issued by the Legislative Fiscal Bureau this afternoon contains the new enrollment assumptions for childless adults and other Medicaid groups.  By using those figures to do some quick calculations, I estimate that the state would save at least $23 million more than the Fiscal Bureau calculated back in February, when it said that by expanding BadgerCare and accepting the increased federal funding Wisconsin would enjoy a net savings of $345 million during the 2015-17 biennium.  (My calculation is based just on the increased childless adult caseload and assumes that other factors, such as the cost per individual, haven’t changed since February.) 

[May 21 update:  LFB figures released this afternoon show that the net increase in savings was a little smaller than I calculated, which suggests that other variables also came into play.  Their new figure is that the total potential savings is $360 million, which is $15 million more than their previous estimate, but $8 million less than my estimate of the effect of the latest enrollment re-estimate alone.]

The Fiscal Bureau’s “cost-to-continue” paper (#345) examines a broad range of variables that influence the total cost of continuing current Medicaid and BadgerCare coverage (but does not specifically examine the savings from expanding BadgerCare).  The new paper indicates that the estimated costs for BadgerCare are now $51.7 million higher than the budget bill anticipated, and new estimates of fee-for-service Medicaid spending have grown by $69 million. On the other hand, the LFB projects substantial savings in several areas, including $30 million more for drug rebates than DHS had estimated, and $23 million less for maintaining Family Care and the related community-based long term care programs (once again showing the cost-effectiveness of those programs). 

The bottom line in the LFB paper is that the combined effect of all the variables is a net increase in the state share of projected Medicaid and BadgerCare spending of $23.8 million (GPR).  In an odd coincidence, that’s approximately the same as my rough estimate of the latest increase in savings the state could realize by expanding BadgerCare to 138% of the poverty (effective in January 2016).  In other words, capturing the enhanced Medicaid funding would fill this new gap in Medicaid funding and still yield roughly $345 million of net savings that could be used to address other needs in the budget.  

One of the bits of good news in the paper is that the state has received more than $73 million in payments by drug manufacturers to settle lawsuits alleging improper charges for Medicaid prescription drugs.  DHS plans to use about $52 million from that source to close the Medicaid shortfall in the current fiscal year, but that leaves an estimated $21.5 million that can be carried forward to the next biennium, when it could be used directly or indirectly to support Medicaid. 

Overall, even though the new LFB paper estimates that total BadgerCare enrollment will be 26,000 higher at the end of the biennium than the budget bill assumed, the net effect of all the changed assumptions is a much smaller upward revision in costs than I was expecting.  And the $23.8 million shortfall is a budget gap that legislators could almost close with a short-term revenue source – the remaining drug settlement payments – or they could close that gap and have about $345 million remaining by using a more stable funding source, the enhanced federal funding for an expansion of BadgerCare. 

The Joint Finance Committee plans to vote on Medicaid issues this Thursday, and all of this week’s LFB papers can be found here.  

Jon Peacock

One Response to “New LFB Paper Makes Stronger Case for Taking Federal Medicaid Funds”

  1. […] the committee will decide to expand BadgerCare and save well over $345 million in the process. (See this blog post explaining why that amount will actually be much […]