Next Year’s State Medicaid Budget Shortfall Already $308 Million
Georgia will delay payment until next month on some $90 million in already incurred Medicaid expenses because it has run out of state funds to pay the bills. That will change when the new fiscal year starts in July. State health officials also predict a $308 million or larger shortfall in next year’s Medicaid budgets and they will ask the Legislature for more money in January.
“Certainly the budget numbers we have are pretty daunting,” Department of Community Health commissioner David Cook said at Thursday morning’s board meeting. Every Medicaid expense category increased this year compared to last year, and some increased more than expected.
This was almost certainly the last Community Health board meeting before the long anticipated U.S. Supreme Court decision on federal health care reform. The Court’s decision is expected this month. If the law is held to be constitutional, the Patient Protection and Affordable Care Act … often described as ObamaCare … will increase Georgia Medicaid costs by billions of dollars.
The state is also near the conclusion of an exhaustive Medicaid redesign that will be announced sometime this summer, no date certain. The challenges are complex. For example, 25% of the state Medicaid enrollment is aged, blind or disabled clients but they are 54% of expenditures. Traditional fee-for-service and managed care are almost equal in total number of claims paid.
“One of the things that has struck me in terms of the redesign process is I think there’s pretty broad agreement that when you coordinate care you not only get better care, but you can save some money,” Cook said. “The question is how can you do that in a way that is doing the best thing for the patients, is attractive to providers and in a way that saves money?”
With an eye on saving where possible, Thursday the DCH board unanimously voted to reduce payments for services provided to patients who are eligible for both Medicare and Medicaid. The department estimates the change will save $48.5 million annually. Payments to physicians, hospitals and ancillary care providers such as therapists and many others will be affected.
The biggest piece of Thursday’s meeting was devoted to a Medicaid financial update including current dollars and forecasts. Chief Financial Officer Vince Harris began by describing the $90 million shortfall. Most of that – some $82 million – is owed to managed care organizations.
“By law we cannot overspend the budget but we will incur those expenses in this fiscal year and we will have to pay them in the next fiscal year,” Harris said. “We are going to be doing that in every one of our larger programs. Not a good thing but something you need to know.”
Total state-funded Medicaid costs that were budgeted at $2,486 billion this year will finish closer to $2.576 billion. The actual costs exceeded budgets in all three major categories: programs to serve aged, blind and disabled (ABD); programs for low income Medicaid recipients (LIM); and, the state PeachCare children’s health insurance program.
Community Health is forecasting shortfalls next fiscal year of $186 million in LIM, $108 million in ABD and $13 million in PeachCare. “This is just preliminary,” said Harris. The supplemental amount that DCH needs from the Legislature next year could be more than those totals.
There is also a rolling number inside DCH financial accounts known as IBNR – Incurred But Not Reported. These are charges for services already provided but the state has not received bills. The FY 2012 projected IBNR is $245 million with $195 million for ABD costs. DCH will not ask the Legislature for supplemental funding to eliminate this shortfall.
DCH also presented a 25-year analysis of real and projected Medicaid costs, covering 1996 when total expenditures were about $3 billion through 2019 when they could reach $14.5 billion if the Supreme Court upholds the federal health care reform law. DCH predicts the additional cost to Georgia taxpayers would be $4.57 billion between 2014 and 2023.
Georgia Medicaid costs paid by state and federal dollars are growing at 5%-to-6% annually, which is greater than the annual growth of the state economy. “The question becomes, over what period of time can you sustain a program that is growing faster than the growth rate of our budget?” said DCH commissioner Cook. “Figuring out where we go with the population, particularly in the aged, blind and disabled population, is, I guess, where the focus will be.”
(Mike Klein is Editor at the Georgia Public Policy Foundation)
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