One of the key appeals of the "private option" to Republican lawmakers is that it moves significant populations that now get coverage under Medicaid out of the public program and onto subsidized private insurance. (This was the inspiration for Republicans' silly and dead-on-arrival attempt to label the new framework "Medicaid contraction.")
They're also hoping that the "private option" will allow them to make big changes to the existing Medicaid program. That's where we could see political fights down the line, and even possibly bumps in the road toward finishing a "private option" deal this year.
Republicans hope that significant reductions to the DHS budget are possible because the total number of people using Medicaid will decline. Rep. Charlie Collins made reference to one Republican dream in making his tax pitch yesterday, speculating that it might be possible to reduce the DHS line item by $175 million.
The problem is that even as some populations will transition out of the Medicaid program under the "private option," the program will also be taking on new beneficiaries: the medically needy who can't get enough coverage on the exchange, and so-called "woodwork" populations — folks who already qualify but haven't signed up for the program yet. That's not to say that expansion under the "private option" doesn't save on Medicaid spending — DHS projects overall Medicaid savings of $42 million in FY 2015. That's just a long way from $175 million.
Collins's figure appears to come from an internal Republican memo, first reported on by Roby Brock, which outlines goals for aggressive reductions in the DHS budget. It suggests legislation setting the following targets:
• DHS grant line-item at $850 million in FY 2015 (executive recommendation is currently $1.025 billion)
• reduction in DHS administration costs by 5 percent in FY 2015
• reduction in Medicaid enrollment by 5 percent in FY 2015 and additional 5 percent in FY 2016
DHS officials told me that they have not seen any specific proposals to cut the program. "We've heard the $850 million number but we don't see how you get there without major cuts," DHS spokesperson Amy Webb said. "They would be cuts far more serious than the ones we previously proposed [in November, under pressure from the shortfall]. When we proposed cutting funding for Level 3 nursing home care, nobody wanted to do that. The populations we serve in general are children, the disabled, and the elderly. That’s where we would have to look at cutting."
Webb also pointed out that any cuts would produce a corresponding reduction in federal matching money. And administrative costs will be lower under the "private option" but won't go away. "Just imagine, we have to process payments for [more than 200,000] new eligibles," she said. "That alone will have some administrative costs."
Could this be a sticking point in the negotiations?
I asked Rep. John Burris, one of the key Republican lawmakers working on the "private option" framework. He wrote back to me: “a target is a sticking point." (Emphasis mine — he's referring to a target as opposed to a cut specified by a hard number.)
“It’s a target based on previous levels of appropriations, factoring [in] reductions in populations and reforms,” Burris wrote. “The goal has to be to stop the out of control costs in Medicaid. It has to be reasonable, but challenging.” He also said that the goals for enrollment reductions were inclusive of populations transferring out as part of expansion, which should make those targets plausible.
It's a little bit unclear to me how to legislate a goal without actually chopping the appropriation in the budget, but obviously a target is not troublesome in the way that a hard cut would be. It will just be up to Republican lawmakers to come up with the money to make the math work without relying on "waste, fraud, and abuse" fairies.
$175 million doesn't seem realistic, but expansion does create wiggle room: DHS is currently projected to have a $77 million surplus in FY 2015 if the state moves forward with expansion. The surplus could be carried over to the following year via the trust fund or the legislature could redirect the surplus money elsewhere.