Washington’s state budget shortfall swelled to between $1.2 billion and $1.3 billion Thursday, because costs for low-income people enrolled in Medicaid programs are far higher than previously calculated.
Through June 2015, Medicaid is expected to cost $360 million more than state budget writers expected. The unwelcome budget news came to light Thursday during the quarterly meeting of the Caseload Forecast Council, which tracks trends in K-12 school enrollment, prison population, welfare rolls and a slew of state-paid medical programs.
State budget director David Schumacher said legislative budget writers were already facing a shortfall of at least $900 million before the latest budget hit. With next Wednesday’s revenue forecast possibly bringing more bad news, Schumacher said the overall hit to the budget from the twin forecasts could be about $500 million.
If correct, the shortfall would swell to about $1.5 billion, adding pressure to raise taxes.
Lawmakers are also under orders from the state Supreme Court to fully fund basic education, and House Democrats have suggested as much as $1.7 billion in new funding is needed to answer the court’s concerns.
Republican Rep. Gary Alexander, who serves on the forecast council, was clearly irritated that the Medicaid cost estimate had changed – and that budget writers were learning about it so late.
The Thurston County lawmaker said Schumacher’s Office of Financial Management and the Health Care Authority, which manages Medicaid, should be called in to give a full accounting to budget writers about what went wrong.
The reasons for the higher Medicaid costs are 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.
Jim Stevenson, spokesman for the Health Care Authority that manages Medicaid, pointed to three causes of the swollen cost estimates.
“We are obviously working to understand more about them. But we did move about 90,000 of our caseload – of fee-for-service, blind and disabled clients – into managed care. That started last summer,” Stevenson said, describing the agency’s past budget assumptions as aggressive. “It’s possible that these estimated savings are not as large as we expected.’’
He said a second factor was a technical adjustment in the way the forecast from last fall and the new forecast were constructed. A third was an unexpected overall increase in utilization of services available through the programs.
It appears the state has no immediate answer to reducing the costs. Senior budget analyst Carole Holland of the Office of Financial Management said low-income Medicaid clients have a right under the law to choose which insurance plan they go into under the program, and more were going into costlier ones.
Holland 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, Holland said.
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.
Other than the Medicaid surprise, the news for budget writers was good: The number of people getting services in most state programs has been falling or will be 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 for a total of 1 million kids, and some medical assistance programs overseen by the state Health Care Authority.
Brad Shannon: 360-753-1688