Running on Empty: The State Fiscal Crisis Worsens

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Running on Empty The State Fiscal Crisis Worsens

• Presentation by
• Vernon K. Smith
• Health Management Associates
• Lansing, Michigan
• For
• National Health Policy Forum
• Washington, DC
• October 18, 2002

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Michigan FY 2002 Revenues, Spending and Program
Cuts
Governors Budget Based on 9.8 Billion
Actual Spending 9.0 Billion
Cuts
Budget Stabilization Fund Begin 1.0 Bil End
0.3 Bil
From Reserves
GF Revenues 8.4 Billion
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Michigan FY 2003 Revenues and Appropriations
Appropriation 9.2 Billion
Initial Shortfall
Note 9.2 Bil. Appropriation based on 2
Medicaid Growth and enrollment declining to 1.2
million
GF Revenues 8.6 Billion
Budget Stabilization Fund Begin 0.3 Bil
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Michigan Medicaid Enrollment Trend1988 - 2002
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U.S. Medicaid Enrollment Increases
SOURCES FY 1998-2001 Eileen Ellis, Vernon Smith
and David Rousseau, Medicaid Enrollment in 50
States December 2001 Data Update, Kaiser
Commission on Medicaid and the Uninsured, October
2002. Publication 4067. For FY 2002-2003
Smith, Ellis, Gifford, Ramesh and Wachino,
Medicaid Spending Growth Results from a 2002
Survey, Kaiser Commission on Medicaid and the
Uninsured, September 2002. Publication 4064.
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Average Annual Growth Rates Total Medicaid
Spending
SOURCE For 1990-1999 Urban Institute estimates
prepared for the Kaiser Commission on Medicaid an
the Uninsured, 2000. For 2001-2002 Smith, Ellis,
Gifford, Ramesh and Wachino, Medicaid Budget
Trends Results of a 2002 Survey, Kaiser
Commission on Medicaid and the Uninsured,
September 2002. Publication 4064.
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Medicaid Expenditure Growth RatesFY 2002 Actual
and FY 2003 Appropriated
SOURCE KCMU survey of Medicaid officials in 50
states and DC conducted by Health Management
Associates, June 2002. Note Percentages are
unweighted averages of all 50 states and DC.
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In State Budgets, Medicaid Spending Is the
Biggest Issue

• Spending growth Medicaid vs. Total
  Budget
• FY2001 (actual).. 10.6 vs. 8.3
• FY2002 (estimated) 12.8 vs. 2.0
• FY2003 (appropriated) 4.8 vs. 1.8

Source NASBO, The Fiscal Survey of States, May
2002, and Medicaid and Other State Healthcare
Issues The Current Situation. A Supplement to
the Fiscal Survey of the States. May 2002
. FY2003 Medicaid from HMA survey for Kaiser
Commission on Medicaid and the Uninsured June
2002 Budget from NCSL survey, July 2002.
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State Strategies to Control Medicaid Spending
Growth
Reducing/ Freezing Provider Payment Rates
Reducing/ Restricting Medicaid Eligibility
Prescription drug cost controls
Reducing Medicaid Benefits
Increasing Beneficiary Co-Payments
SOURCE KCMU survey of Medicaid officials in 50
states and DC conducted by Health Management
Associates, June 2002.
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Medicaid Eligibility Cuts A Measure of Budget
Severity

• 18 states planned to reduce or restrict
  eligibility, including some that will eliminate
  coverage for persons now eligible
• Missouri cut 32,000 adults effective July 1 some
  restored by TRO
• New Jersey stopped accepting Family Care
  applications, dropped 1931 disregard for
  applicants, plans to increase reliance on charity
  care
• Nebraska reduced eligibility for 25,000 children
  and adults
• Massachusetts plans to eliminate coverage for
  50,000 unemployed adults effective April 1, 2003
• Oklahoma may end eligibility for up to 93,000
  adults and children
• Other eligibility reductions include
• reducing the length of TMA or post-partum
  pregnancy-related coverage
• tightening eligibility by restoring asset and
  income reporting requirements for families and
  medically needy individuals
• restricting spend-down for persons with high
  medical costs
• Ending continuous eligibility for children

SOURCE KCMU survey of Medicaid officials in 50
states and DC conducted by Health Management
Associates, June 2002.
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Oh my, the outlook for FY 2004 is
unbelievably bad. --Michigan official

• Revenues Forecasts are being revised downward
• UPL restrictions hit in FY 2004
• Expenditures Medicaid is the driver of
  expenditures
• Michigan will have to absorb 700 million in
  added General Fund costs to support Medicaid in
  FY 2004