Agency: Cut services or expand Medicaid

Legislators hear of fix: Dump 75,000 off rolls

John Selig, director of the Arkansas Department of Human Services, listens to lawmakers’ questions after he gave details on proposed Medicaid cuts Tuesday at the state Capitol.

John Selig, director of the Arkansas Department of Human Services, listens to lawmakers’ questions after he gave details on proposed Medicaid cuts Tuesday at the state Capitol.

Wednesday, November 14, 2012

— To address a shortfall expected to hit the state next fiscal year, Arkansas will have to cut $460 million worth of services to 75,000 mostly elderly and disabled Arkansans, state Department of Human Services Director John Selig said Tuesday.

Arkansas could avoid the worst of the cuts by expanding its Medicaid program and adding 250,000 people to its rolls, Selig said. That idea hasn’t seen much support from Republican lawmakers, who now control both the House and Senate.

For nearly a year, state officials have warned that the trust fund that helps pay for the state’s Medicaid program will be depleted by next summer and that if additional revenue isn’t found, recipients would face significant cuts in services.

About 780,000 Arkansans are enrolled in the state Medicaid program.

Selig presented the most detailed outline of those proposed cuts to members of the Arkansas Legislative Council and the Joint Budget Committee on Tuesday. The committees sent the proposed Medicaid budget to a subcommittee for discussion.

The budgeting process recently began and will last until the end of the 2013 legislative session. Gov. Mike Beebe is expected to release his full budget proposal Thursday. The budget is for fiscal 2014, which starts July 1, 2013, and for fiscal 2015, which starts July 1, 2014.

The department asked for $358 million more general revenue for Medicaid in fiscal 2014, for a total of $1.16 billion, and $467.2 million for fiscal 2015, for a total of $1.27 billion.

But the executive branch recommended only a general revenue increase of $96.8 million in fiscal 2014, for a total of $892.8 million, and $229 million in fiscal 2015, for a total of $1 billion.

That leaves a gap of $278 million for fiscal 2014 and $256 million in fiscal 2015.

Beyond general revenue, the governor recommended using $70 million of the state’s $197 million in surplus funds in both fiscal 2014 and fiscal 2015 and the approximately $48.5 million expected to be put into the Medicaid trust fund from the 2-cent soft drink tax.

Those funds would reduce the shortfall to about $199 million.

Selig said the department estimates the shortfall to be closer to $138 million in fiscal 2014 and $75 million in fiscal 2015. That’s because the budget anticipates faster growth in Medicaid enrollment than the department has seen and because the federal government isn’t cutting back Medicaid matching funds as much as expected. He said savings brought about by the payment improvement initiative, which will reward doctors based on the average cost and quality of the care they provide, should equal about $15 million in fiscal 2014 and $65 million in fiscal 2015.

“It’s not a big number, but every few million helps,” Selig said.

The federal government will provide an estimated 69.67 cents for every dollar spent in the state Medicaid program in fiscal 2014 and 69.17 cents per dollar in fiscal 2015.

If the state doesn’t provide its share of the matching funds, the federal government won’t provide its portion and Arkansas is short that money as well, Selig said. Without the federal match, the $138 million shortfall in state funds becomes about $460 million less for the state Medicaid program.

“Those numbers are pretty staggering,” said Rep. John Burris, R-Harrison.

Selig said the department looked at services that, if removed, would cause the least amount of harm and wouldn’t affect children.

“It’s the best we can do. It is not harmless by any means; of some really bad options, this was the best we could come up with,” Selig said.

The department’s proposed cuts include:

Eliminating level 3 nursing care, which is care for people who are totally dependent on another person for mobility, feeding or using the toilet, or people who need limited assistance in two of the categories.

State Medicaid Director Andy Allison said this cut means 10,000 to 15,000 senior citizens and disabled people would no longer have nursing care.

Freezing participation in community based services at current levels. These services are used to keep the elderly or disabled people in their homes.

Cutting the rate paid to all Medicaid providers by 3 percent and not adjusting for inflation the flat fees paid to hospitals and institutions.

Eliminating all adult dental services. Allison said about 40,000 people used this part of Medicaid in fiscal 2012.

Eliminating the ARHealth-Networks program, which provides health insurance to about 20,000 people who are self employed or work for small companies.

Requiring prior authorization for four outpatient rehabilitation services that last more than six hours per day.

Requiring prior authorization to provide more than six prescription drugs to a child per month.

The department estimates that the eliminated or reduced services would save $130 million in fiscal 2014 and $189 million in fiscal 2015. That amount is also multiplied by the federal match, equal to about $433 million.

Sen. Jonathan Dismang, R-Beebe, told Selig and Allison he was disappointed that the proposed savings didn’t include policy changes proposed by lawmakers, such as requiring Medicaid enrollees to pay a co-pay.

“This has been coming for a long time, the growth in our programs has been coming for a long time, and I hate that it’s just now that we are seeing what your perceived solution is in all these cuts,” Dismang said.

Selig said he most wants to avoid ending nursing care for senior citizens, which provides an estimated savings of $42 million in the first year, and $101 million in the second year.

“We do have an option for avoiding the worst of these cuts were we to choose the expansion. You’d still have some of these reductions but not the worst of them,” Selig said. “There is a way to get there still.”

Under the federal-health care law, the Patient Protection and Affordable Care Act, states can choose to expand who is eligible to apply for Medicaid and have the federal government shoulder the cost for the first three years. Arkansas could expand the program to 250,000 people, but some legislators have been reluctant to do so because between 2017 and 2020 the state will gradually assume 10 percent of the cost for the new recipients.

It would take 75 votes in the House and 27 votes in the Senate to pass an appropriation bill authorizing the expansion.

Selig said expanding Medicaid eligibility would save $44 million in state revenue because the federal government would cover the cost of some current enrollees. There would be additional revenue from people visiting the doctor and the state wouldn’t be responsible for uncompensated care any longer. That money is not in the department’s proposed budget.

Gov. Mike Beebe said the shortfall estimate is better than expected.

“It’s rosier. With our conservative forecast together with our ability [to spend] ... some one-time money, we’re able to get that deficit down,” Beebe said. “That’s still going to mean some cuts, and some of them are going to be harder than others. There are some things that can get those things down too.”

When asked what could reduce those cuts, Beebe responded: “Expansion.”

Front Section, Pages 1 on 11/14/2012