State Medicaid Deficit Drops Sharply

Friday, April 4, 2014 at 4:43 PM by

Increased Federal Funding Helps Close Projected Shortfall

New figures submitted this week to the Joint Finance Committee by the Dept. of Health Services (DHS) show a significant drop in the projected shortfall in Wisconsin’s Medicaid budget. The latest quarterly report from DHS says the estimated deficit in the state share of Medicaid funding has declined to $20.3 million GPR, which is a drop of $72.3 million GPR since the end of 2013.

The new DHS report itemizes most but not all of the reasons for the $72.3 million improvement. Those reasons include:

  • Family Care – Smaller projected increases in enrollment and per person costs for Family Care, PACE/Partnership, and IRIS over the remainder of the biennium are expected to save $35.4 million GPR.
  • CHIP funding – The state has implemented an initiative to claim CHIP (Children’s Health Insurance Program) funding, which has a higher federal match rate, for certain hospital costs for CHIP-eligible children., which is expected to save the state $19.7 million in this biennium.
  • FQHCs – Cost settlements with the federal government for federally qualified health centers will be $8.7 million less than previously estimated. (I think that’s a cost-savings for the state, but the wording in DHS report is ambiguous.)
  • Bonus funding – The last quarterly report didn’t take into account the good news the state received in late December that the FFY 2013 performance bonus under the CHIP Reauthorization Act is expected to be $3.4 million than the budget assumed. (Read more here.)
  • Lower caseload estimates and other factors – The rest of the reduction in the cost estimates is attributed to caseloads that are lower than assumed in the budget bill, savings in certain (unspecified) HMO payments, and moderating trends in “various service lines.”

The brief report doesn’t shed much light on the latest assumptions about BadgerCare enrollment, but it does mention that enrollment of adults without dependent children is expected to be 4,000 below the level assumed in the budget bill in FY 2015 (94,600 rather than 98,600). It attributes that to lower current enrollment than Act 20 assumed. I think that’s essentially a way of saying that the 3-month delay in starting to cover childless adults, coupled with a larger than anticipated drop in participation last year (which I suspect is the result of the July 2012 changes) will suppress enrollment over the remainder of the biennium. Even if we end the biennium at the previously anticipated enrollment level for adults without dependent children, the average monthly enrollment could be less than the budget bill assumed.

One thing I find very interesting about the latest update on the deficit is that the state has managed to close the hole in the budget without increasing the state’s percentage of the total. That’s surprising because a major cause of the shortfall is that an increase in state income has resulted in an automatic reduction in the federal match rate, thereby requiring the state to pay a larger percentage of Medicaid costs.  But the state is offsetting the reduced matching rate by other ways of capturing more federal dollars, including the new initiative to maximize CHIP funds.

But regardless of how the state has managed to bring down the projected shortfall, the bottom line is that the substantial reduction is very encouraging news for people who care about the Medicaid budget, and for those of us worried about the state’s overall budget balance.

Jon Peacock


One Response to “State Medicaid Deficit Drops Sharply”

  1. Joe says:

    Reasons – 77,000 will be kicked off of Badgercare