Mike Klein Online

Next Year’s State Medicaid Budget Shortfall Already $308 Million

Mike Klein

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)

June 14, 2012 Posted by | Uncategorized | , , , , , , | Leave a comment

Georgia Has Good Reason to Be Wary of Washington Super Committee

Mike Klein

News generally breaks down into two kinds: good and bad.  The good news on Tuesday was the United States of America did not default on its financial obligations, although a Chinese credit rating agency was unimpressed and downgraded U.S. debt anyhow.

The bad news is states will almost certainly feel like they got a sucker punch come the holidays.  There is almost no way that states and cities can win in the next Washington spending cuts scenario.  On Wednesday policy analysts were trying to answer, What Does It Mean?

“The bad news is for states and cities, uncertainty remains,” said Kil Huh, research director at the Pew Center on the States.  “As part of the deal to raise the debt limit Congress capped discretionary spending, expecting to save over $900 billion over the next ten years.  What that means for states and cities is that they’re uncertain about where the cuts are going to come from, how deep they’ll be, or the timing of those cuts.”

Congressional leaders will name a twelve-member super committee – six Republicans, six Democrats – within two weeks.  The lucky dozen will propose at least $1.2 trillion in spending cuts before Thanksgiving.  Everything will be on the table – including Medicaid, Medicare, Social Security, defense spending and assistance to states. The Senate and House will vote before Christmas.  Across-the-board spending cuts will be imposed if the committee proposals fail.

The impact in Georgia could again be life changing as the definition of affordable government service continues to shrink.  The state has gone well past fixing its financial challenges by closing unnecessary museums.   There is only so much you can accomplish with attrition and furlough days.  At some point entire government service sectors might become unaffordable.

All this is happening as Georgia and other states move into new fiscal years without federal stimulus funds that enabled them to claim balanced budgets.  Last year Georgia received $1 billion; the new Fiscal 2012 budget was balanced without stimulus.  Politically, stimulus funds are an idea whose time has come and gone.

Next year budget planning is underway without any real idea how much federal support will be available.  Georgia received $8.5 billion in total federal assistance during Fiscal 2010, the last year for which audited data is available.  That included $5.4 billion for Medicaid.

About one-third of state budget dollars nationwide come from the federal government.  It should be clear now that shrinking state governments will need to shrink even further.

Carolyn Bourdeaux, Georgia State University Fiscal Research Center

“Part of Georgia’s issues are going to come from where we are already relatively efficient — depending on your viewpoint — in Medicaid and social services so cuts in these areas are going to be felt  more keenly,” said Carolyn Bourdeaux, associate director at Georgia State University’s Fiscal Research Center.

States are fearful of ObamaCare legislation mandates that will expand Medicaid eligibility starting in 2014.  The total could be several hundred thousand persons in Georgia.  That is one reason more than two dozen states including Georgia challenged ObamaCare in federal court.

There are plenty of Georgia budget sectors that could be impacted by Washington spending cuts.  What kind of transportation budget can it anticipate?  The Fiscal 2010 budget had nearly $900 million in federal funds.  Federal education dollars are 14 percent of the state budget.

Will decisions in Washington have an impact on Georgia’s unfinished tax reform?  The state is trying to reduce its reliance on personal income tax revenue.  Legislators almost finished tax reform this year before they lost confidence in the financial analysis.

Carolyn Bourdeaux again from the GSU Fiscal Research Center:  “My quick assessment is there are going to be two issues coming out of the federal discussion that might influence tax reform.  One is going to be whether the state wants to make up the difference for lost federal dollars which it could do even post tax reform.

“Two, if Congress takes up federal tax reform this may have a ripple effect on state taxes.  For instance, our income tax is linked to the federal income tax.  Georgia policy makers may want to see what happens with this,” Bourdeaux said.

The bottom line on tax reform:  It was important before.  It becomes more important now.

Georgia will also pay close attention to possible reduced defense spending.  Georgia lost Forts McPherson and Gillem, the Navy Supply Corps School in Athens and Naval Air Station Atlanta as part of military base realignment recommendations that became law six years ago.

Overall, however, the state was a winner.  It gained some 4,000 military and civilian personnel plus their dependents because of expansion, much of it at Fort Benning in Columbus.  Georgia also has vast military employment in Atlanta metro, central Georgia and on the coast.

If you’re into countdown clocks, the Congressional super committee is down to 112 days.  They will not be comfortable days for anyone trying to anticipate how this will affect Georgia.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

August 3, 2011 Posted by | Uncategorized | , , , , , , , , , | Leave a comment

Debt Commission: Restore Public Option, Reduce Mortgage Deduction

The bipartisan National Commission on Fiscal Responsibility and Reform appointed by President Barack Obama caught nearly everyone by surprise Wednesday with its unexpected release of a draft report.  The White House said the traveling President would not comment until the Commission’s work is complete, which was already anticipated sometime next month.

Here is a link to the complete 50-page report.

Notably, the Commission draft report buries one of its potentially biggest and most controversial headlines:  “Add a robust public option and/or all-payer system in the exchange” to achieve long-term health care savings.  The very first mention of that idea is found on page 36. Continue reading

November 10, 2010 Posted by | Uncategorized | , , , , , , , , | Leave a comment

Health Care Reform: Drink Red Wine!

Atlanta Mike Pix_Press_Club_189_-_Version_2Everyone is right about health care.  It is the biggest, scariest thing out there.  This week I attended a health care reform discussion whose panelists included the vice chairman of a prestigious international corporation, a university health care policy researcher, an insurance industry representative and a successful businessman who employs about two dozen people.

None of them expect a really great, game changing result from current Washington paralysis.  All four agree health care insurance reform should focus on rewarding preventive health care, but they don’t see that in the current conversation that often resembles a train wreck.  They do not trust the process or the likely outcome. Continue reading

October 7, 2009 Posted by | Uncategorized | , , , , , , , , , , | Leave a comment