Washington’s state budget shortfall swelled to between $1.2 billion and $1.3 billion today, thanks to an unexpectedly higher cost for low income people enrolled in Medicaid programs.
That is the upshot of today’s meeting of the Caseload Forecast Council. But the higher costs are not apparently due to higher enrollments in state programs.
A draft report issued during the Caseload Forecast Council’s morning meeting today showed that the number of people getting services in most state programs has been falling or is less than previously forecast. Exceptions are K-12 school enrollments, which are now expected to be a few thousand pupils higher than the November forecast, and medical assistance programs overseen by the state Health Care Authority.
The Office of Financial Management, which puts a dollar cost to caseload changes, says an unexpected increase in Medicaid costs since the November forecast is to blame for the worsening financial situation.
All told the surprise increase in Medicaid costs is expected to be $360 million more through June 2015 than state budget writers expected in November – costs offset by gains in other areas for the net-loss of $301 million on the state’s predicted bottom line through fiscal year 2015.
State budget director David Schumacher said the state budget writers had been facing a shortfall of at least $900 million before the latest news. “It makes it $300 million bigger,” Schumacher said of the shortfall. And that is before the state considers up to $1.7 billion more to answer a state Supreme Court ruling in the McCleary case involving the inadequacy of the state’s funding of basic education.
The late disclosure came as an unwelcome surprise to Republican Rep. Gary Alexander of Thurston County, who serves on the forecast council. Alexander called for a more thorough briefing of budget writers on the Medicaid cost problem from Schumacher’s Office of Financial Management.
With a revenue forecast coming out next Wednesday that also is expected to drop, Schumacher said the overall hit to the budget from the twin forecasts could be about $500 million. That sum is in line with what House Majority Leader Pat Sullivan, D-Covington, said last week.
The reasons for the higher Medicaid costs are complex and related to efforts by the state to move clients from a fee-for-service system, which pays medical providers whatever they charge, to a managed care approach that is like a health-maintenance organization or HMO. The state had predicted large savings from moving clients into the HMO model.
But senior budget analyst Carole Holland of the Office of Financial Management said clients under the law have a right to choose which insurance plan they go into under Medicaid, and more were going into costlier ones. She said the higher costs also could be the result of the types of services the clients were receiving. Those who are in the program tend to be the highest need and chronically sick, according to Holland.
Medicaid is a $9 billion program with costs shared by the federal government. Under federal health reform, costs for new enrollees after Jan. 1, 2014, are expected to get funded 100 percent through 2016 by the federal government and the state’s share could go to 10 percent in 2020.
UPDATE: Rep. Alexander rolled out an “education budget” plan this afternoon that puts $800 million in new money for K-12 schools – in response to the Supreme Court ruling that the Legislature under-funds basic education. Alexander said his budget proposals can balance – with at least $80 million in new revenue from a telecommunications tax change – even after the new Medicaid costs are factored in. But, he said during a press conference, the new costs pull down his ending-fund balance, or reserve, to near zero (not counting Rainy Day Fund dollars).