LITTLE ROCK — An estimated 75,000 Arkansans would be affected by $319 million in cuts to health services ranging from dental treatment to nursing home care being proposed as part of Gov. Mike Beebe’s plan to address a looming shortfall in the state Medicaid budget.
Lawmakers meeting at the Capitol for budget hearings in advance of the 2013 regular session heard Tuesday that the state Medicaid program faces a projected $298 million shortfall in state funds in the fiscal year that starts next July and that Beebe is proposing a combination of new spending, efficiency measures and cuts in services to cover the deficit.
State Department of Human Services Director John Selig told legislators the shortfall is largely the result of a decrease in the federal matching rate for Medicaid funding, prompted by economic growth in the state. He said the cuts the governor proposes are regrettable but necessary in the absence of other revenue sources.
“We hate the idea of cutting. The reductions … are not things we want do,” Selig said.
The impact of the cuts may be lessened, however, if the state pursues an option under the federal Affordable Care Act that would expand Medicaid coverage mostly at the federal government’s expense, Selig said.
The Beebe administration is scheduled to unveil the governor’s balanced budget proposal to lawmakers Thursday.
Beebe’s proposals would shore up Medicaid with $90 million in general revenue and $70 million in one-time surplus funds in the fiscal year that begins July 1. He also is proposing measures estimated to reduce expenditures by about $130 million.
The following fiscal year, when the shortfall is projected to be $367 million, Beebe is proposing using $222 million in general revenue and $70 million in surplus funds, while the cost-cutting measures implemented in the previous year are expected to save $189 million.
Officials believe none of the proposed cuts would result in “immediate harm or death,” state Medicaid Director Andy Allison said.
State Sen. Jonathan Dismang, R-Beebe, said it was disappointing that administration officials were only now presenting a plan to deal with a shortfall that has been known to be coming for a long time. He also said he wished the Beebe administration had listened to ideas from legislators, such as using co-pays to influence patient behavior.
“Democrats, Republicans alike have asked for some kind of co-pay system, some type of skin in the game,” he said.
Selig said the state has asked for a federal waiver that would give it the flexibility to pursue ideas like those Dismang referenced.
Allison said that of the governor’s proposed cuts, the one that would have the greatest impact on Medicaid recipients would be eliminating the lowest level of nursing home care, known as Level 3 care. The state Medicaid program is required by the federal government to provide Level 1 and Level 2 care, but Level 3 care is optional.
Eliminating Level 3 care at nursing homes — for patients who need limited help with daily functions — is estimated to save $35 million in fiscal 2014 and $84 million in fiscal 2015. Eliminating the same level of care for patients in home- and community-based care is estimated to save $7 million in fiscal 2014 and $17 million in fiscal 2015.
“We estimated it would affect about 10,000 to 15,000 seniors,” Allison said. “The consequences for individuals, etc., would be significant — on families, certainly the individuals. It would certainly have an impact on facilities and the (health care) infrastructure.”
Other proposals in Beebe’s plan include eliminating Medicaid coverage for adult dental services; eliminating ARHealthNetworks, which provides coverage for about 20,000 low-income adults with full-time jobs; limiting coverage for adults in home- and community-based care to the current participants; and several changes aimed at managing programs more efficiently.
The governor also is proposing skipping one year’s inflationary increase in Medicaid reimbursements paid to health care institutions and reducing reimbursements to other health care providers at 3 percent below what they would otherwise be.
Arkansas is in the early stages of implementing health care payment reforms under which doctors will be paid for bundled episodes of care instead of being paid for each service provided. Selig and Allison said their projections of the Medicaid shortfall take into account a projected $15 million in savings in fiscal 2014 and $65 million in savings in fiscal 2015 as a result of the initiative, with the savings expected to increase further in later years.
Allison said that if Arkansas opts to expand Medicaid to 138 percent of the federal poverty level, the impact on the state would be a net savings of $44 million in fiscal 2014 and $115 million in fiscal 2015. The federal government would pay for expansion for the first three years, after which the state’s share of the cost would gradually increase to 10 percent.
Selig told reporters after the hearing it may be possible to avoid implementing some of the proposed cuts if the state pursues the expansion.
Beebe supports the expansion, but Republican legislators have voiced resistance to it. Barring a reversal of the election results in a northeastern Arkansas House district where the Democratic candidate has requested a recount, Republicans will hold majorities in both the House and Senate in the coming session.