Addressing the Medicaid shortfall

Legislative leaders met in a meeting of the House appropriations committee this morning to consider S.B. 797, which would allocate funds to meet the state’s current year Medicaid shortfall. Estimates of this year’s Medicaid budget gap have proved to be a moving target, initially estimated at around $139 million, then growing to $149 million in the wake of a federal  court order reinstating coverage of personal care services for adults with disabilities. This morning, House appropriations chair Rep. Brubaker explained that legislative leaders and the Office of State Budget and Management have agreed to revise the estimate of the current-year Medicaid shortfall upwards to $205 million, with the increase being driven by higher-than-estimated program utilization across all categories of eligibility.

Not mentioned in this morning’s discussion  was legislative leaders’ insistence last year that the current budget adequately funded the Medicaid program, despite disagreement expressed by the Department of Health and Human Serviceslegislators, and advocates representing Medicaid’s numerous and diverse stakeholders.

S.B. 797 creates a prioritized list of funding sources for the current-year Medicaid shortfall and requires that each source of funds be used (up to the amount specified) before the next is tapped. The list is:

  1. $50 million in funds available within the Department of Health and Human Services, excluding transfers of unearned or borrow Medicaid Disproportionate Share Receipts, delay of drug rebates, or transfer of any funds that will create or increase a financial obligation in FY2012-13 or beyond;
  2.  $10.5 million from the portion of the state’s Repairs and Renovations Reserve Account that are currently allocations to DHHS;
  3. $105 million in projected current-year General Fund reversions from all state agencies and departments, including debt service reversions;
  4. $20 million in projected revenue overcollections. If used, this amount would have to be deducted from the forecasted $232 million revenue surplus for FY2011-12.
  5. A further $20 million from the Repairs and Renovations Account, if necessary.

The impact of this measure on total availability for the FY2012-13 budget is not entirely clear and will depend on how much money is actually drawn down to pay Medicaid claims for the current year. To the extent that agency reversions and the revenue surplus are used to fund Medicaid, availability for other General Fund purposes will be decreased. Similarly, the upcoming Medicaid shortfall for FY2012-13, currently estimated at $243 million, is unaddressed by this legislation.



  1. Alex

    May 23, 2012 at 1:14 pm

    Why not wring all of the fraud and abuse out of the Medicaid program first ?

  2. Brenna Burch

    May 23, 2012 at 1:16 pm

  3. Louie

    May 23, 2012 at 1:34 pm

    higher-than-estimated pharmaceutical utilization? ever since DTC advertising was allowed its been a real headache for budgeteers of all health insurance plans.

  4. Brenna Burch

    May 23, 2012 at 1:40 pm

    Based on today’s committee discussion, my understanding of the prescription drug component has to do with some cost-shifting from the federal government to the states as part of recent changes to the rebate program, not higher beneficiary prescription drug consumption. Hope that helps.

  5. Alex

    May 23, 2012 at 2:22 pm

    I hope they are on it Brenna, but I still wonder why this was announced right after the WRAL investigation. Fraud has been occurring in the Medicaid program for years, and we’ve done very little about it while millions have been lost !

  6. Brenna Burch

    May 23, 2012 at 2:27 pm

    True, fraud has always been a problem in every state that participates in Medicaid. It’s also true that the analytics-based IT tools that states are using to detect fraud are rapidly improving, which in turn makes fraud increasingly difficult to commit, especially on a large scale.

  7. […] To link to this story, click HERE. […]

  8. Alex

    May 23, 2012 at 6:55 pm

    I could give you the names of at least five providers who are gouging the Medicaid program as we speak !

  9. Carly EngageAmerica

    May 29, 2012 at 2:45 pm

    An obvious reform is to block grant Medicaid funds to the states. This would grant them greater flexibility in tailoring Medicaid offerings to their state’s specific needs, and would place the onus upon the states to limit spending.

    Block grants would encourage states to mimic successful private health care delivery reforms, and if those reforms reduce spending on acute care by just 4% per year, annual spending would fall by $9.5 billion.

    Block grants would remove a significant incentive for states to inflate the price of health care by imposing health care taxes that increase federal matching funds.

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