Medicaid Costs Continue to Drain State Budget

Medicaid costs in Massachusetts continue to rise at an exponential rate, with new figures showing that program absorbing all new state growth and forcing enormous cuts in just about every other area of government. The news on the prospective budget coming out of Beacon Hill in the last two days has been almost uniformly bad. Today the Legislature heard from an array of outside experts on what their estimates are for state revenue growth. Those numbers, by themselves, were not all that bad. Revenue estimates from Michael Widmer, the Beacon Hill Institute, and Alan Clayton Matthews ranged from 3.9% to 4.7%. That sounds pretty good. But lets look at the spending side of the ledger, in particular Medicaid. The rolls continue to expand, and the money that follows it is growing so fast that even a 5% increase in revenue just will not be enough. We are talking about next year, but lets slip back, for a moment, to the current fiscal year:From the State House News Service:

In October, three months into the state’s new fiscal year, Governor Deval Patrick and the Legislature directed another $327 million to the state’s $10 billion Medicaid program when allocating about $400 million in onetime federal funds approved by Congress and President Obama.

Less than three months later, the Patrick administration is warning of up to $500 million more in additional spending that might be required, in part to keep pace with caseloads at Medicaid, which alone accounts for about a third of all state government spending.

So, in this cycle, with existing programs, including local aid, having taken massive hits, state government will have to supplement an already bloated health care budget by up to $827 million. That budget number is over $10 billion, and climbing so fast that it will eventually crowd out ALL other state spending. What that number is going to be for next year will be known soon enough, but the trend lines are shocking and not sustainable. So what does A&F Secretary Jay Gonzalez say?

Gonzalez said budget writers must look at “all the state’s health care programs” – including the Group Insurance Commission for state employees; MassHealth for the poor, elderly and disabled; Commonwealth Care, a state-subsidized program for the low-income; and the Medical Security Program for the unemployed – to “figure out ways to keep them from growing at the rates that health care costs grow for everybody.

“If we don’t change the way we structure those programs, administer those programs, then they aren’t sustainable,” he said, although he acknowledged that many of the proposed solutions are long-term.

Not sustainable. A theme we hear much talk about, but not much action on. The state’s answer seems to be to keep cutting ALL other state programs to keep feeding this line. What do the other experts say about health care and the state budget?

“We are facing a longer-term, I think permanent shift, in which we do not have the revenues … to support the array of programs we support,” Widmer said. “That’s not a value judgment. That’s an analytical judgment.”

Clayton-Matthews agreed.

“The structural deficit will continue to grow unless fundamental changes are made to spending, taxes or both,” he said.

An analytical judgement? Doesn’t Mike Widmer understand that there is no room in state budget deliberations for analytical judgements?

What about other runaway budget lines? Well this blog has talked about pension costs as a huge budget buster. Without a tweak to the pension schedule the State could be looking at an additional pension liability of $700 million next year, which does not appear to be included in the potential $2 billion dollar shortfall. The Governor has started dropping hints as to the extent of the carnage coming. Lets see if the recommendations coming out of the State include mechanisms to reduce local health care costs, which would help to blunt the effects of cuts in local aid. Based on past performance nobody should be holding their breath. Senate Ways and Means Chair Steve Panagiotakos talks about the problems in this video.

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