Budget Update: more interim budget cuts, calls for long term fix, Medicaid deficit due to temporary issues

In response to a growing budget shortfall for this year, last week the Governor ordered $31.5 million in budget rescissions. This is the Governor’s second round of cuts for this fiscal year. Health-related cuts included $8.4 m from DDS, $1.3 m from DMHAS, $602,435 from school-based health clinics, $71,515 from Healthy Start, and $1.3m from UConn Health Center. Republican leaders are concerned that continuing rescissions are keeping the deficit just under the statutory level requiring a deficit mitigation plan be submitted to the legislature.

OPM is reporting that Medicaid spending is $120 m over budget. It is our understanding that the shortfall is due to one-time issues including CMS settlement payments from difficulties categorizing eligibility, and uncertainty over relevant dates (service vs. payment) affecting reimbursement in the first Medicaid expansion year. The state is responsible for half the costs of care for enrollees in pre-ACA coverage categories, in contrast to newly eligible enrollees whose costs are 100% reimbursed by the federal government trough 2016, slipping modestly to 90% eventually. Reports of higher than expected enrollment in pre-ACA HUSKY categories have reversed in recent months. Also adding to the Medicaid shortfall was an optimistic fraud recovery estimate in the original budget passed last Spring. Hospital retroactive settlements are up over last year, but this will also be resolved when the state moves to a DRG-based payment system.

All the issues adding to the shortfall will be resolved soon and should not precipitate calls that Medicaid spending is “out of control”. Because of quality and value improvements in the program, per person spending in the program is stable, saving about $150m in state Medicaid funds compared to per person health cost increases for all Americans