Two weeks ago, we covered issues in the amended budget. This week, we will cover the projected needs for the fiscal year 2014 general budget that will begin July 1, 2013, and will be decided in the upcoming session.
In total, we estimate that enrollment growth and deficits that have popped up since the passage of the FY13 general budget will require approximately $900 million in additions that will need to be covered either by new revenues or cuts to state agencies.
Medicaid dominating needs
FY14 general need — $400 million
As in the amended budget, Medicaid will require a large addition to cover steady enrollment growth. Of the $400 million need, more than $320 million will be needed because of population growth and increased utilization of services. These numbers are accurate as of the end of this summer and might change as the Department of Community Health, the agency that administers Medicaid and PeachCare, gets updated information.
The remainder of the funds will be required because of the implementation of the Affordable Care Act. As you might remember, the U.S. Supreme Court in June decided that Medicaid expansion required by the act was not legal and left the decision up to the states. Gov. Nathan Deal has indicated that Georgia will reject this piece of the health care overhaul, at least in the short-term.
But there are other costs associated with the measure that Georgia cannot avoid. The first is the "woodwork effect." Medicaid expansion only impacts those who are between 100 percent and 138 percent of the federal poverty level, approximately $23,000-$31,000 a year for a family of four. But according to the DCH, about 50 percent of those eligible for Medicaid are not actually enrolled in the program.
As the requirement for insurance goes into effect, many of these are expected to join Medicaid and avoid penalties. This phenomenon is called the "woodwork effect" because it is projected that people will come "out of the woodwork" to join the program. The "woodwork effect" and other provisions will add approximately $70 million in costs to the program in FY14.
The $400 million need assumes that the hospital provider fee is renewed this session. We discussed this issue a few weeks back, but to recap, Medicaid is dependent on this fee to support a portion of its budget. If not renewed, Georgia will need to cut state agencies another 2 percent in order to make up the gap, and hospitals would face an immediate rate reduction of 12 percent.
We will discuss the agency cuts later, but it should be noted that DCH was directed to cut Medicaid spending by 5 percent in the FY14 budget. Georgia’s Medicaid spending was already 50th in the nation per enrollee costs in 2009. Because of eligibility restrictions and Georgia’s minimal offering of services beyond what is required by the federal government, it will be difficult to determine where $100 million in cuts will originate.
Next week — other FY14 budget issues.
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