Legislative Update
August 16, 2008
Rep. Anne Donahue
I’ve been expressing concern for some time now that we’ve been making promises we can’t keep.
The fallout is beginning to hit already: $4 million for the emergency low income heating program didn’t make it into the coming year’s budget after all, Catamount Health is heading for bankruptcy more rapidly than predicted, and Dr. Dynasaur is under pressure from federal regulators for over-expansion.
This is before the new cuts that are coming as a result of the economic slowdown. These projections come from the Joint Fiscal Office’s newest report.
Every year, the budget includes a final category called the “waterfall.” These items get funded if there is an overflow — either higher revenue or unexpended money — from the prior fiscal year at the end of June.
When the budget is healthy, everything even on a long waterfall list gets funded. This year, because the economy did not reduce tax revenues until late in the fiscal year, the waterfall was projected at only $11.8 million.
Several key items that were announced as having made it into the “final budget,” as I noted in the spring, actually were dependent upon these extra revenues, including the $2 million economic stimulus package and $5 million which, with matching federal money, was being relied upon for a number of health programs.
Those two survived with the $7.5 million that did come in. The last thing on this year’s short list was $4 million for LIHEAP, the low income home energy assistance program, and the waterfall dried up before getting there.
This amount was already a little less than last year’s general fund contribution to this mostly federal program, and this year, it isn’t clear yet what will be coming from Washington.
What we do know from our Joint Fiscal Office is that last year, the total amount for the program was $24.4 million. This year, if the same needs are met but the projected increase in fuel costs is reached, it would cost $43.4 million, a 78 percent increase.
As of this week, the only definite allocation of federal dollars is the $11.6 million base block grant.
A list of initiatives that is being developed by the administration and the chairs of the appropriations committees to help in the heating and food costs crises can be found on these two web sites:
www.leg.state.vt.us/jfo/energy/home.htm, and HelpForVt.org.
Catamount Health is seeing lower revenue than projected, meaning that the impact of annual operating deficits will use up most of the available balance this year and next.
The Medicaid budget also had a waterfall this year, and fortunately, all items were covered: fortunately, because those items included the $8 million in cuts that the governor had proposed in funds owed to the state’s hospitals, and legislative leaders claimed we had “restored.” We had only restored them contingent on extra money.
State Medicaid funding pays substantially less than what it actually costs to provide health care services, and the difference is covered through higher private insurance rates, the “cost shift.”
Our federal match even for those funds has suddenly reared up with two new threats, both of which affect Catamount as well.
First, Vermont is operating under a 5-year pilot program with Washington called the “Global Commitment,” which allows us to create and fund a variety of low income health programs that can save money, but don’t fall under traditional Medicaid rules.
In exchange, we agreed to a cap on spending equal to the estimate of what the regular Medicaid budget would have cost in federal matching funds. That is what enabled us to help fund Catamount Health.
One of the terms was that this estimate would be set by an actuarial firm at the start of each year; in the first two years, it was done near the end. Now the federal office is insisting on it being done as an advance projection.
This creates a risk resulting from imperfect projections. If we under spend, we don’t get the extra; if we overspend, we lose any federal match for those programs.
Secondly, Vermont is one of 15 states facing new rules for having its Medicaid coverage extended to children in families at 300 percent of the poverty level, rather than 250 percent.
The good news is that federal regulators backed off simply cutting off the matching funds for the program. However, meeting the terms of the new rules will be a challenge, according to several national advocates quoted in last Saturday’s Times-Argus. [The Times-Argus ran a national article that failed to mention that Vermont was one of the affected states.]
The decision to enforce the 250 percent level, however, also means that it will be a near certainty that Vermont will not get a change of heart from Washington over having barred matching money it had originally expected in the budget for Catamount participants in the 250 to 300 percent range.
As a whole, next year, Medicaid is projected to be in a $38 million deficit, but that assumes the state budget is able to add an extra $10 million of its part of matching funds. If our budget does not increase, the deficit will be $94 million, according to Join Fiscal.
Catamount is behind in its goal for enrollments, but publicity has brought increased enrollment in the VHAP, lower income, program. There are 10,000 additional Vermonters — about 1.5 percent more — with health coverage.
This does not affect the cost shift because, as with other health cost containment efforts, there has been no “recapture” as part of the legislation. If providers are having a reduction in uncovered care, there is no mechanism for those reduced losses to reduce the cost shift.
It doesn’t mean hospitals are profiting from any extra cash, as the recent cuts in services in Rutland demonstrate. Since there have been no true cost containment efforts since the Health Resource Allocation plan legislation in 2003, costs continue to increase faster than existing revenue, and we continue to see those costs passed on to our taxes and insurance premiums.
The Joint Fiscal Office had other bad news. Unlike other accounts, the Transportation budget was in the red already at the close of this year, with a $3 million deficit. Between the time the budget for the current year was passed in May and now, the forecast projects a $7.9 million shortfall. (That budget had already dropped in revenue projections between January and April by $12 million before it was passed.)
The legislative Joint Fiscal Committee, which meets during the off-session, had budget cut proposals on its agenda earlier this week to address the general fund budget shortfall.
It is also reviewing the bid process for a consultant team the legislature is hiring to to assist with analysis next year on the authorization of Vermont Yankee to extend its operating license.
Three “summer study committees” are holding their first meetings in the last two weeks of August. (This is a typical schedule for these misnamed committees!)
The Committee on Palliative, End-of-Life Care and Pain Management is scheduled for August 18, the Smart Growth Study Committee for August 20, and the Higher Education Funding Committee for August 28.
Contact me any time with questions or concerns by leaving a message at 485-6431 or counterp@tds.net. You can also check my new blog site at http://annedonahue.blogspot.com