Supreme Court Ruling Adds to Wisconsin’s Substantial Budget Challenges

Wednesday, July 21, 2010 at 12:43 AM by

The Wisconsin Supreme Court ruled today that the state must pay back the $200 million it transferred from the medical malpractice fund to help balance the 2007-09 budget. The 5-2 court ruling  sided with the arguments by the Wisconsin Medical Society that taking the money from the fund was unconstitutional.  The ruling adds to the substantial challenge Wisconsin will have in bringing the 2009-11 biennial budget back into balance.

The case now goes back to a lower court, which will implement the ruling. The lower court will determine how much interest the state must pay on the $200 million and will determine the repayment timetable, which some expect to be a gradual repayment schedule.

Today’s news adds to the state’s fiscal difficulties. As the Milwaukee Journal Sentinel reported last Thursday, Secretary Timberlake recently testified before the Joint Audit Committee that Wisconsin is likely to have a deficit of about $300 million in the state share of funding for Medicaid and BadgerCare Plus, and that could mean total state and federal cuts of as much as $850 million.

In light of the combined effects of today’s court ruling and the recently announced Medicaid deficit, it appears that the legislature will almost certainly have to come back sometime for a special session to get the budget into the black, but it seems unlikely that will happen before the fall elections. If or when a budget adjustment bill is legally required will depend on several variables, including: a) the repayment schedule ordered by the lower court, and b) how much cutting the Doyle Administration decides to do unilaterally within the Medicaid and BadgerCare budgets.

In a written statement today, Department of Administration Secretary Dan Schoof said that the Doyle Administration will begin making cuts and that Medicaid provider rates are likely to be one of the things that take a hit:
“…cuts authorized in the budget, which we hoped to at least partially avoid, and other savings measures will now need to be implemented. We will also need to make additional cuts to the Medicaid and BadgerCare Plus programs through across-the board reductions in provider rates.”

Coming up with $200 million or more from the health care safety net programs is a very difficult and economically damaging course of action because each dollar of state spending now leverages more than $2 in federal Medicaid match. That match rate is currently scheduled to go down in January (if Congress does note extend Medicaid relief for the states), but by averaging together the current and 2011 federal match rates we estimate that cutting $200 million in state Medicaid-related spending would necessitate cutting a total of roughly $575 million in state and federal funds from Medicaid, BadgerCare Plus and SeniorCare.

The suggestion to cut Medicaid rates does not come as a surprise, but that response carries the risk of causing more providers to stop serving Medicaid and BadgerCare Plus patients. That could hurt many of the more than 1.1 million Wisconsinites served by those programs, and could be a severe blow to jobless and low-income working families already suffering greatly from the recession.

At this point there are no painless solutions for rebalancing the state budget, but during a deep recession the state should exhaust all other options before weakening programs that provide such a vital lifeline for struggling families, the elderly and people with disabilities. And in times like these, policymakers should strive to avoid cutting spending that puts so much federal matching funds into circulation in the Wisconsin economy.

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