In 2011 the Idaho Legislature made very large cuts to Idaho’s medical assistance (Medicaid) programs.  These cuts were the result of forecasted revenue that was insufficient to maintain medical assistance and other state programs at a constant level of service without some form of revenue increase. It now turns out the revenue forecasts used to justify those significant cuts to Medicaid and other programs were incorrect, and the cuts were unnecessary.

Once again Medicaid is a major topic of discussion, this time in the 2012 Legislative session. Numerous calls have been made to restore the cuts that were enacted in 2011. The Governor’s latest revenue forecast issued January 9, 2012 could easily support immediate restoration of medical assistance services, but there are no indications that the Governor will recommend any restoration of last year’s medical assistance program cuts.

Let’s take a closer look at the major components of Idaho’s medical assistance programs, how the 2011 cuts were spread across those programs, and how Idaho’s revenue has performed since those cuts were made.

There are four distinct programs within Idaho’s budget that make up what we call Medicaid. Here are brief descriptions of each of those programs:

Medicaid Administration & Medical Management (MAMM) is the program that provides for the administration of Medicaid, including managing provider payments, medical management, drug utilization reviews, and licensing and inspecting health facilities.

Basic Medicaid Plan (BMP) is the program that primarily covers low income children and pregnant women. These beneficiaries tend to have average levels of health and disease.

Coordinated Medicaid Plan (CMP) is the program that primarily covers low income beneficiaries who are 65 and older. All individuals eligible for both Medicaid and Medicare, regardless of age, may elect coverage under this plan.

Enhanced Medicaid Plan (EMP) is the program for children and adults with disabilities or other special needs. This program tends to have relatively high costs per beneficiary.

In FY 2011 Idaho’s actual total spending on Medicaid (all four programs, all fund sources) was $1.882 billion, or 30.7% of total state spending. Here’s the breakdown within Medicaid:

MAMM            $  48.2 million, 2.6% of total

BMP                $495.6 million, 26.3% of total

CMP                $340.5 million, 18.1% of total

EMP                $997.8 million, 53.0% of total

The budget cuts made during the 2011 Legislative session included $66.1 million in what were called “Omnibus Decisions.” This amount was cut from the General Fund across all agencies. The Medicaid programs’ share of those General Fund cuts totaled $34.5 million, but when all fund sources were factored in the total cuts to Medicaid were $89.7 million.

It is fair to say that Medicaid took a disproportionate share of the “Omnibus Decisions” cuts that were made in the 2011 legislative session. The FY 2012 General Fund appropriated amount for Medicaid (i.e., before the “Omnibus Decisions” cuts) was $470.7 million, or 18.1% of the total General Fund. The Medicaid share of the “Omnibus Decisions” cuts ($34.5 million) was 52.2%, or almost three times Medicaid’s share of the total General Fund portion of the budget.

A comparison of the “Omnibus Decisions” cuts across all state programs to the cuts within the programs that make up Medicaid demonstrates the concentration. Here’s the FY 2012 breakdown (the General Fund amounts shown are before factoring in the “Omnibus Decisions” cuts):

The legislative appropriation bill with the Medicaid program cuts shown above was sent out of the Joint Finance-Appropriations Committee (JFAC) to the House on March 31, 2011 and was signed into law by the Governor on April 11, 2011.

On July 12, 2011 actual FY 2011 revenue was announced and it was $85.3 million higher than the forecast the Legislature used for budgeting purposes just three months earlier, a sure sign the FY 2012 revenue forecast would be revised upward. It was also a very strong indication the “Omnibus Decisions” cuts had been unnecessary. No action was undertaken to reverse those cuts.

On August 11, 2011 the Governor’s budget office released a new FY 2012 revenue forecast that was $161.6 million higher than the forecast used by the legislature to set budgets for FY 2012. That new revenue forecast clearly indicated the $66.1 million in “Omnibus Decisions” cuts were unnecessary. No action was undertaken to reverse those cuts.

On January 9, 2012 the Governor’s FY 2013 Executive Budget was released. The revised FY 2012 General Fund revenue forecast has been lowered, but it is still $113.0 million higher than the FY 2012 revenue forecast the “Omnibus Decisions” cuts had been based on nine months earlier. No action has been taken to reverse those cuts.

On February 7, 2012 the Governor’s budget office released the February 2012 Idaho General Fund Revenue Report. In two months under the new revenue forecast a positive cushion of $13.2 million has developed. On February 10, 2012 the Associated Press reports the Governor “remains adamant about not restoring $35 million in funds cut from Medicaid last year.”

Next week (February 20, 2012) the legislature’s budget committee (JFAC) is scheduled to begin setting budgets. One of the first decisions they will need to make is the number to use for FY 2013 General Fund revenue. The legislature’s Economic Outlook and Revenue Assessment Committee (EORAC) met at the beginning of the legislative session and picked an FY 2013 revenue number $33 million lower than the Governor’s. Nonetheless, in the month and a half since the release of the FY 2013 Executive Budget most economic indicators have pointed to improving conditions. 

The bottom line is this — even if JFAC adopts the EORAC’s lower revenue number, there is still sufficient revenue capacity to restore the medical assistance cuts. It’s no longer a matter of revenue. It’s about the legislature’s spending priorities.