Proposition 2 arguments heard by Supreme Court

Proposition 2 arguments heard by Supreme Court

I attended the Supreme Court oral arguments today in Regan V. Denney, the challenge to the constitutionality of Proposition 2 -Idaho’s Medicaid expansion initiative. The Idaho Freedom Foundation argued that Proposition 2 cedes the State’s authority to the Federal government, primarily because Medicaid is tied to Federal Poverty Levels that are set by the Federal government and the 90/10 match rate could be changed by the federal government at some point in the future.

The State argued that the Freedom Foundation really didn’t have standing to bring this case before the Supreme Court, but the Justices seemed to want to move past that argument and get to a point where they could rule on the merits of this case. An attorney for the Idaho Medical Association also argued against the ceding of authority by highlighting the fact that the State currently has all types of federal-state programs and cooperative agreements, including our existing Medicaid program, none of which are considered to cede legislative authority to the federal government.

Both sides were asked thoughtful questions by the Court to bring greater clarity to the technical aspects of Medicaid and the implementation of the voter approved initiative.

The court recognizes that thousands of Idahoans are waiting for some determination in this case, and the legislature is also looking for some guidance from the court. They took today’s oral arguments under advisement, but it seemed like they would make their decisions and issue a ruling in fairly short order.

Photo of Brian Whitlock, President / CEO Idaho Hospital Association
Brian Whitlock, President/CEO
January 29, 2019

Budget Recap – Medicaid Expansion, GME

Budget Recap - Medicaid Expansion, GME

In addition to the inaugural events and the State of the State address, we were able to get a first look at the Executive Budget Recommendations from the Governor to the Legislature. We thought we would highlight for you some of the key budget items affecting Medicaid expansion, Graduate Medical Education as well as overall Medicaid funding.

The total cost of the state match for Medicaid expansion is $19,655,500. That 10% match will bring in a projected $176.9 million in Federal funds. The total Medicaid expansion spend in the final six-months of FY2020 is projected to be $196,555,600.

The Governor is recommending a “net zero” impact to the state’s General Fund to come up with the required state match. He is recommending that $9,267,000 be redirected from existing programs that serve individuals who will become eligible for enrollment in the Medicaid expansion population:

$1,422,900 – Hospitalization per diem reduction (Dept. of Correction budget)
$1,444,100 – Community based Substance Use Disorder Treatment (Dept. of Correction budget)
$1,000,000 – Community Hospitalization (H&W budget)
$4,200,000 – Adult Mental Health (H&W budget)
$1,200,000 – Substance Use Disorder Treatment (H&W budget)

Again, this funding represents six-months’ worth of spend in the last half of FY2020. When the Legislature sets the funding level for FY2021 next year, they would be able to redirect the full years’ worth of those program dollars to Medicaid expansion – $18,534,000.

For the remaining balance of the FY2020 10% match, the Governor recommends the use of $10,388,600 in one-time money from interest on the state’s Master Tobacco Settlement Agreement Fund – or Millennium Fund.

As the Legislature considers the Governor’s funding recommendations, it will be done against the backdrop of more upward pressure on the existing Medicaid budget.

For instance, because of the way our state’s economy is performing, and the fact that our FMAP rate is based on per-capita income, the FY2020 blended rate of our Medicaid Federal match will drop from 71.14% to 70.53%. That may not seem like a significant decrease, but given the size of the Medicaid spend, that means the state will have to shift $13.2 million from Federal funds to the State General Fund.

Additionally, Health and Welfare is asking for a $31,878,000 for the current fiscal year to address increased utilization in the enhanced Medicaid program. And, looking ahead to the next fiscal year, they are projecting a need for an additional $32.5 million because of increased utilization, and an additional $40.2 million to bring the Department current with their hospital cost-settlement adjustments.

Also, the Catastrophic Healthcare Fund requested a doubling of their budget to meet projected demands in FY2020. They asked for $20 million and the Governor recommended $15 million. If actual costs exceed the appropriation, they would need to come back to the Legislature for a supplemental appropriation.

The Governor’s recommendation for Graduate Medical Education was a compromise reached by the State Board of Education’s GME Committee. It increases the current per resident amount from $35,000 to $40,000 for existing programs, and for any buildout or new residencies, it funds them at a $60,000 level.

This will be a benefit to the 18 residents at the Kootenai FMR program ($90,000), the 10 existing and 10 new residents at EIRMC ($650,000), and the existing and one new resident at Bingham Internal Medicine ($120,000).

The Governor’s budget recommendation did not include funding for the Honoring Choices initiative. The creation of a statewide advance care directive registry was not requested by the Department of Health and Welfare, and while the Governor was aware of the initiative, he also did not include it in his budget recommendation. However, we have been in contact with all 20 members of the Joint Finance and Appropriations Committee (JFAC), and are hopeful that when the Department presents to JFAC, there will be questions about the cost-benefit of this $860,000 potential line-item. The positive feedback we’ve received from committee members may be reflected in their final Health and Welfare budget.

Most legislators are concerned about a timing issue on General Fund revenues. Because of last year’s Federal and State tax cuts, and no resulting change in the withholding tables, individual income tax receipts are coming in well short of projections. The Tax Commission expects more people will be writing checks to the IRS and the State in April – but they also enjoyed more money in the paychecks throughout 2018. The timing of when that money comes in has the Legislature cautious about spending money that’s not in the bank – and you will probably see a very conservative approach to setting next year’s budget while the withholding issue settles itself out. In fact, the Legislative committee that sets revenue projections reduced the Governor’s FY2020 revenue forecast by $93 million dollars.

We hope this gives you a good sense of the Governor’s budget recommendations as they relate to hospitals and healthcare, and also a feel for the cautious approach that the budget committees will probably take as they begin their work. Please reach out to us if you have any questions.

Photo of Brian Whitlock, President / CEO Idaho Hospital Association
Brian Whitlock, President/CEO
January 11, 2019