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Trying to fill budget hole
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The budget hole created by the end of federal stimulus funds, particularly in the enhanced Medicaid match, is a problem for the FY2011 budget and a huge deficit to fill in the FY12 budget. Agencies are being tasked to provide 6 percent and 8 percent scenarios for the amended budget. The governor has withheld 4 percent from agencies’ allotments but not all agencies have reduced spending based on this reduction.  
For FY12 budget presentations, the governor has asked for 6 percent, 8 percent and 10 percent presentations. Given the budget reductions over the past two years, cuts at these levels could have very visible affects on state government and put faces on budget cuts that could affect all parts of the state.

The Department of Community Health is a key budget proposal
The Department of Community Health (DCH) was instructed to prepare 4 percent, 6 percent and 8 percent reduction scenarios for the amended FY11 budget and 6 percent, 8 percent and 10 percent scenarios for the FY12 general budget. In the past, the Governor’s Office of Planning and Budget (OPB) exempted the state’s Medicaid programs from the same levels of reductions as other agencies, but this year, the Medicaid programs were included as well.

The Medicaid and PeachCare dilemma
Due to the Patient Protection and Affordable Care Act (PPACA), the state is very limited in the types of reductions it can make to the Medicaid and PeachCare programs. PPACA has restricted states from adjusting eligibility for these programs, meaning the state cannot lower income requirements to restrict increases in enrollment. The law also prevents states from raising premiums. This has left the state with really only two options, eliminating optional services or reducing provider reimbursement rates.   
DCH decided not to recommend cutting optional services, such as pharmacy, podiatry, dentistry and hospice care, since these programs are often a less costly alternative than serving a patient in an emergency room. To meet the required scenarios requested by OPB, the Department has recommended a wide range of provider cuts, expected to save $67-$123 million in FY2011 and $54-$109 million in FY12.   
Hospitals, Federally Qualified Health Centers (FQHCs), hospice care, and Rural Health Clinics (RHCs) would be exempt for these reductions. The implementation of provider reimbursement cuts, if at all, will have to wait until Georgia elects a new governor. Provider cuts, though, endanger an already fragile Medicaid provider network.
The state also has several shortfalls within the Medicaid program to address in the FY11 amended budget and the FY12 general budget.  
Starting in January 2011, the federal government will begin phasing out the enhanced Federal Medical Assistance Percentage (FMAP), also known as the federal matching rate, back to pre-federal stimulus levels. This has created a $131.1 million shortfall in FY11 and a $684 million shortfall in FY10. DCH has also projected an additional $27 million in growth over the current FY11 budget and an additional $37 million in growth in FY12.
DCH was not required to fill these shortfalls in their recommendations scenarios, meaning these funds will likely have to be found elsewhere in the budget.  
The remaining recommendation includes recognizing $10 million in savings from drug company settlements, $10.5 million in FY11 and $11.5 million in FY12 from drug rebate changes in PPACA, as well as savings from other policy changes and program reductions. But make no mistake, there is a real dilemma brewing in regard to Medicare.

Public health 
Each public health program was required to recommend 4 percent reductions in FY11 and a 6 percent reduction in FY12. For the remaining scenarios, DCH recommended targeted cuts to specific public health programs. For example, due to the approximately $5 million in stimulus funds received for immunizations, the department recommended a $1.9 million reduction to vaccines in the FY11 8 percent scenario. The department also identified vacancies throughout the Public Health Division and prior year lapsed funds, which is the amount of funds a program did not spend in the previous fiscal year. Both vacancies and lapsed funds were included in the FY11 8 percent scenarios and the FY12 10 percent scenario.
Some notable reductions include a $1.2 million reduction for HIV and STD testing and $116,000 to $666,773 reductions for cancer screening programs. The recommendation also includes a 4 percent reduction in FY11 and a 6 percent reduction in FY12 to grant-in-aid to county boards of health, which use these funds for operations of public health departments. Budget cuts at the 8 percent to 10 percent level are sure to draw opposition from local governments and legislators.
Next week’s column will include the State Health Benefit Plan.

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