Lower Medicaid Spending Is Good, Bad News

Members of the legislature’s Joint Finance Committee got some very good news last Friday in the form of a quarterly report on the state Medicaid budget from the Wisconsin Department of Health Services (DHS).  The letter from the interim Secretary of DHS indicates that the agency now estimates that Medicaid spending during the 2015-17 biennium will be $418.6 million below the amount lawmakers anticipated when they passed the budget bill a year ago.

The portion of Medicaid spending specifically from state General Purpose Revenue (GPR) is projected to be almost $176 million (3.1%) less than the budget bill set aside. That’s an improvement of $90.6 million GPR since the last projection was made three months ago.

These numbers from DHS are very good news at a time when state revenue projections haven’t been very good. The reduced growth in Medicaid spending improves the prospects for keeping the total state budget in the black – without resorting to additional remedial measures (beyond the delay in debt payments that the Governor already implemented). I think the new numbers also show that DHS can and should adopt procedures that streamline enrollment and renewals when the state already has data showing that families are eligible for BadgerCare.

DHS is always careful not to use the word “surplus” when they describe a projected Medicaid balance. That’s partly because Medicaid projections can be volatile, as the department invariably notes in its quarterly reports, and partly because under-spending doesn’t build up revenue in a Medicaid cookie jar. Unspent amounts at the end of the biennium generally lapse to the General Fund.

The primary reason for the 3.1% decrease in projected state spending for Medicaid is that enrollment is substantially less than anticipated. My quick review of various Fiscal Bureau and DHS documents indicates the following:

• The May BadgerCare enrollment was about 27,600 (3.3%) below the average that the budget bill assumed for the 2015-16 fiscal year.
• The budget bill was based on an anticipated BadgerCare enrollment increase of 1.6% in the first year of the biennium, but the May enrollment level was about 1.8% below the average during the prior year.
• Enrollment in May for the “elderly, blind and disabled” (EBD) category of Medicaid was about 6,200 (2.8%) below the average that the budget bill assumed for the 2015-16 fiscal year because rather than increasing 0,7% as anticipated, the EBD enrollment was about 2.1% below the 2014-15 average.

According to DHS, other factors in the lower spending estimate include:

…slower than projected growth in prescription drug expenditures, higher drug rebate revenues, revised projections for nursing home utilization, lower growth in personal care and home health services, and updated assumptions for the timing of cost settlement payments to federally qualified health centers in FY 16.

The DHS report suggests that one of the factors in the enrollment decline is improvement in the state economy, and I think that’s probably correct – even though Wisconsin’s job growth over the past several years has trailed that of most other states. However, I’m concerned that another factor is that our state isn’t doing as good a job as it previously did in signing up eligible children and families in BadgerCare, and in renewing the coverage of eligible individuals.

A recent Urban Institute analysis of Census Bureau data estimates the enrollment percentage for children in each state who are eligible for either Medicaid or the closely related Children’s Health Insurance Program (CHIP). Those estimates indicate that Wisconsin is now below the national average for the percentage of eligible kids participating in Medicaid or CHIP, after formerly being a national leader in that regard.

In light of the substantially lower estimates of Medicaid enrollment and spending, it’s time for state officials to rededicate themselves to ensuring that BadgerCare serves eligible children and families. Our state should utilize the tools that many other states are using to make enrollment and renewal processes more efficient and less burdensome for families.