[V]ermont’s Medicaid program is expected to be $15 million to $20 million over budget in the fiscal year ending June 30, according to an internal administration report.
VTDigger was not immediately able to obtain a copy of the report, which tracks weekly Medicaid expenditures, but the legislative Joint Fiscal Office confirmed the anticipated overrun. The overages are the result of growing Medicaid rolls and the amount of medical care beneficiaries are receiving.
Programs within Medicaid provide health coverage to 181,000 residents, or close to 30 percent of the state’s population, according to figures from February.
Income eligibility was increased in 2014 as part of the Affordable Care Act’s Medicaid expansion, allowing tens of thousands of new beneficiaries to qualify. The Medicaid expansion is a major reason Vermont’s uninsured rate has dropped to 3.7 percent, second lowest in the nation, and half of what it was in 2012. There are signs it may be starting to reduce the growth in overall health care spending as well, state officials say .
To sustain the program, Vermont needs to put more money toward it, reduce what Medicaid covers or rely on new payment and delivery models to drive costs out of the system. Advocates say reducing what the program covers would hurt beneficiaries and result in increased costs elsewhere in the health care system.
Shoring up a $15 million to $20 million hole expected in the Medicaid budget would cost the state between $7 million and $9 million, because the program is paid through a mix of state and federal dollars.
Gov. Peter Shumlin said Wednesday that the state’s share of Medicaid is likely to face a $40 million budget gap in fiscal year 2017, which his top aides said does not include the $7 million to $9 million. The $40 million figure reflects expected declines in federal Medicaid match rates, one time costs and the use of older projections of the program’s future caseload and utilization.
Jim Reardon, commissioner of Finance and Management, called Medicaid the “primary driver” of an anticipated $60 million budget gap in fiscal 2016.
Efforts by the governor and some lawmakers to make a significant investment in Medicaid — which would require raising taxes — haven’t gained traction in the Legislature with a week before lawmakers are expected to adjourn.
Shumlin said at a Wednesday news conference that his plan to levy a 0.7 percent payroll tax would have generated a $40 million “surplus” starting in fiscal year 2017 — eligible for a federal match — which could go a long way to addressing Medicaid’s sustainability issues.
That’s a message that was garbled in the hyper-focus on whether the other $100 million in spending from his proposal could reduce the Medicaid cost shift.
Trinka Kerr, lead attorney for Legal Aid’s Office of Health Care Advocate, said she was “shocked” to learn about the overrun, though she was aware of some cost increases.
“You think they would have anticipated more people coming on, I mean that’s the national trend,” Kerr said.
“The state needs to find a way to pay for it,” she said, adding that Medicaid services are an important safety net for Vermonters.
Steve Costantino, newly appointed commissioner of the Department of Vermont Health Access — which is responsible for Medicaid — said a $15 million to $20 million overrun “isn’t surprising” given the ACA expansion and the difficulty of precisely estimating its impact.
“You’re talking about close to a billion dollar (program), and you’re talking $15 to $20 million which is really one-and-a-half to two percent of it,” Costantino said.
Costantino acknowledged the difficulty of coming up with more money for Medicaid given the state’s budget gap — not to mention the anticipated gap next year — and the program has to be part of the state’s overall efforts to align spending with revenue.
Vermont is in the process of trying to reform how health care providers are paid, including how they are paid by Medicaid. The current payment model compensates based on the volume of services, but Vermont hopes to implement a system that pays based on patient outcomes and containing overall costs.
“(Medicaid) is going to be sustainable as long as we do the kind of innovations we’ve been talking about here in Vermont,” Costantino said.
“Whenever I’m asked if Medicaid is unsustainable, I ask ‘what’s the alternative?’” Costantino added, noting the program’s role in allowing vulnerable populations to get needed medical care.
The Medicaid expansion is likely saving the health care system money, Costantino said, in ways that aren’t fully visible yet.
One area where the expansion may be having an impact is the amount of uncompensated or charity care hospitals offer to those who can’t afford their medical bills — typically the uninsured. Hospitals’ uncompensated care dropped from 1.2 percent of gross hospital revenue in 2013 to 0.9 percent in 2014, according to figures from the Green Mountain Care Board. That’s a reduction of close to $10 million.
The Medicaid expansion is also likely helping to reduce avoidable hospital admissions for beneficiaries with chronic conditions through managed care programs, such as the Blueprint for Health, and it may also be reducing the number of beneficiaries seeking care in hospital emergency departments, Costantino said.
While hospitals and other providers are likely to appreciate the reduction in uninsured patients, they have consistently urged lawmakers to increase the program’s reimbursement rates.
Medicaid’s low payments — which are estimated to cover 60 percent what services cost — raise concerns that providers might be reluctant to accept new Medicaid patients and there’s some evidence that it’s already happening.
The bulk of spending from Shumlin’s proposed payroll tax would go toward increasing payment rates to providers, though again it doesn’t appear the Legislature is on board.
The Medicaid expansion allowed close to 20,000 new beneficiaries to qualify for the program, by the state’s calculations. However, that doesn’t include more than 31,000 people formerly covered by the Vermont Health Access Plan (VHAP) who are now also on Medicaid.
VHAP included premiums and did not include a dental benefit or transportation services. A surge in demand for transportation is being driven primarily by people who need rides to receive daily opioid treatment or attend adult day care, according to Kerr.
She learned from state officials that Medicaid’s transportation budget is over by $2 million in the current fiscal year at a recent meeting of the Medicaid Exchange Advisory Board Improving Access working group, of which Kerr is the chair.
Costantino acknowledged the pressure transportation services are putting on the Medicaid budget, but said that’s part of providing critical services in a rural state. State medicaid programs are federally required to offer transportation, he added.
Another pressure on the state’s Medicaid budget is declining federal match rates. The rate of state to federal dollars in Medicaid is known as the Federal Medicaid Assistance Percentage (FMAP) determined yearly by the feds. It is calculated based on a three-year average of state per capita personal income compared to the national average.
The federal calculation is problematic, said Lawrence Miller, chief of Health Care Reform, because while overall wages may be increasing in Vermont, wages for the Medicaid eligible population are stagnant. As a result, the feds are reducing match payments even as demand remains steady or grows.
No state can receive less than a 50 percent match, but Vermont’s match has consistently trended downward since the 1990s and is now 54 percent.
The declining FMAP rate is expected to cost the state an additional $22 million in fiscal year 2017, according to state figures.
