Departing Democratic Gov. Mike Beebe is recommending boosting state general revenue for the state's Medicaid program by $78 million to $981 million in the fiscal year starting in July and setting aside $40 million in surplus funds for the program for the next two years.
He's also recommending that lawmakers delay implementing for two years about $25 million in tax cuts approved in 2013 and set to go into effect in July.
Beebe said the additional state funds are needed for the Medicaid program, in part, because the state will receive a lower rate of matching funds from the federal government than in previous years.
States with lower per-capita income get more of the costs reimbursed, but Arkansas' wages are increasing compared with other states, Beebe said.
"We are the victim of our own success," Beebe told reporters.
Dawn Stehle, director of the state's Medical Services Division, told lawmakers Wednesday afternoon that the Medicaid program also needs more ongoing state general revenue to help replace about $70 million in surplus funds that it's relying on in the current biennium and to cover modest growth in the program.
The Medicaid program has grown between 1.5 percent and 2 percent a year during the past two years, and these rates are lower than during the past 20 years, Stehle said. The program had been increasing between 6 percent and 10 percent a year, said department Director John Selig.
Department officials are conservatively projecting a growth rate for the Medicaid program of about 5 percent a year in fiscal 2016 and fiscal 2017, Selig said.
The Legislative Council and Joint Budget Committee later voted Wednesday to draft a bill that follows Beebe's recommendation for the program that lawmakers will consider in the session starting Jan. 12.
Republican Gov.-elect Asa Hutchinson, who is to be sworn in Jan. 13, will make his own budget recommendations later for fiscal 2016. He has proposed a $100 million income-tax cut that he has said would reduce state tax revenue by $50 million in fiscal 2016 and $100 million in fiscal 2017.
Beebe recommended a Medicaid budget for fiscal 2016 that includes $5.7 billion in federal funds and $981 million in state general revenue, plus $40 million in surplus funds for the next two years.
The fiscal 2015 budget for Medicaid includes $4.8 billion in federal funds, $903 million in state general revenue plus $69.9 million in state surplus funds.
Some of the increased federal funds in fiscal 2016 would allow the program to participate in new demonstration grants under the federal Patient Protection and Affordable Care Act "as appropriate," according to state budget records.
Rep. David Meeks, R-Conway, said he thought that adding the private-option program that uses federal Medicaid dollars to purchase private health insurance for low-income Arkansans "was supposed to keep Medicaid from having this type of increase."
Selig told reporters that the Medicaid program would have required even more state funds in fiscal 2016 if the state wasn't saving about $90 million a year through its private-option program.
Earlier, Rep. Denny Altes, R-Fort Smith, asked Selig "where are we going to cut" if the state is hit with another recession.
Selig said the Medicaid program includes some mandatory programs and some optional programs, "and so it comes back to those optional programs, and then of those, which ones are big."
The state's large optional Medicaid programs include its prescription drugs program, ARKids First health insurance program, and level-three nursing home care, he said.
Level-three nursing home care is for people who are totally dependent on others for mobility, feeding or using the toilet, or people who need limited assistance in two of the categories.
With the mandatory programs protected, "cutting $100 million in state funds means cutting $300 million in total program funds [because the federal matching dollars drop as well]. So there is just no good choices when you start doing that," Selig said.
Then, Altes said, "So you have a plan, you think."
Selig replied, "No, sir" and said he hopes he doesn't have to implement those types of cuts.
Then, Altes said, "You may see that on the horizon."
Selig responded, "I hope not."
It's estimated that 248,000 Arkansans would qualify for the expanded Medicaid program based on their incomes.
Total costs for the program are projected to be $1.9 billion in fiscal 2016, the first year of full enrollment, including costs related to people enrolled in the private option and those determined to be medically frail who are cared for in the traditional Medicaid program, but are funded at "enhanced federal participation rates under the Affordable Care Act," according to budget records.
As it stands, the program extends insurance coverage to adults with incomes of up to 138 percent of the poverty level -- $16,105 for an individual or $32,913 for a family of four.
Federal dollars pay 100 percent of the private option until fiscal 2017, when the state will pick up 5 percent of the cost. The state's share ultimately will be 10 percent starting in fiscal 2020.
Meeks said he wants department officials to provide information about how much they spent on Medicaid and the private option last year, and what they are requesting for fiscal 2016.
A section on 11/13/2014