Tuesday, March 8, 2011

The Pennsylvania Medicaid Budgetary Squeeze

In Fiscal Year 2002-2003, I worked for the Pennsylvania Department of Public Welfare in the Medicaid Office of Budget and Planning.  Back then the State's total budget was $40 billion and Medicaid accounted for $10 billion.  The spending was in entitlement form which means that, like the prison system (the world's oldest entitlement program), when an applicant is determined to be eligible for services, the State and Federal governments must come up with the needed funds for their health care.  The Feds provide $0.55 on the dollar while each state provides the rest.  The states do have some discretion on which things are covered (unlike Medicare which is strictly administered by the federal government).

While I was there, the state was transitioning it's approximately 1.5 million recipients from a fee for service system where doctors and hospitals were paid directly by the state into a managed care system where transactions between recipients and providers were being administered by HMOs.  The rationale, as it was told to me, was that many providers would not accept Medicaid patients otherwise if they were being paid directly.  An outsiders interpretation of course is that it is just welfare for insurance companies.  The managed care move was not having the desired effect of bringing costs under control (especially prescription drugs).

These days the states and the federal government are under self imposed pressure to control their spending on social services while not raising taxes on the wealthy.  Suzy Khimm at Mother Jones magazine has a good review of current efforts at the Federal and State level to control costs by cutting back on care and playing with eligibility rules.

Medicaid Roulette | Mother Jones

The new Governor Tom Corbett R has proposed his first budget to the state legislature.  Because he has promised not to raise taxes, is constitutionally required to balance the budget, and has many of residents unemployed and not paying taxes he is forced to cut spending in Education and in Healthcare.  Most of the cuts will have to come in Higher Education and other discretionary programs which are different from entitlement programs.  His proposed budget is $27.3 billion which is far below what is was when I was there.  I do not know if that includes Medicaid or not.  Details to come.

Corbett swings budget ax at schools, colleges

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