Looking at Medicaid in the 2018-2019 Texas Budget

The Texas Senate and House of Representatives have agreed on a $217 billion 2018-2019 budget, officially named Senate Bill 1. Eva DeLuna Castro has a good overview of the whole budget. Let’s take a closer look at the funding for Medicaid.
Total funding for Medicaid in 2018-2019 is $62.4 billion All Funds ($26.3 billion non-federal).

  • This is actually lower than the amounts allocated and spent for the current 2016-2017 budget (that is, the 2015 appropriations plus the supplemental appropriation to finish out 2017).
  • The largest Medicaid budget cut directive is in Health and Human Services (HHSC) Rider #34 Cost Containment, which requires the agency to reduce Medicaid spending by $830 million All Funds ($350 million General Revenue).
  • HHSC Rider #158 requires savings from a less generous formula used to set Medicaid Managed Care premium rates: $182.6 million All Funds ($76.3 million GR).

The budget covers what the Legislative Budget Board (LBB) estimates for caseload growth for Medicaid for 2018, but NOT for 2019; also unfunded is projected cost growth per Medicaid participant for 2018 or 2019. The LBB has not released recent projections of these unfunded amounts.  Early in the session, Medicaid caseload growth for the full biennium was scored at over $700 million GR, so shorting the budget for just one year can be estimated around $300 million GR.  HHSC has estimated the amount of the cost/inflation needs as high as $1.9 billion GR; so with updates and lower LBB assumptions, the gap between this appropriation and the need for 2018-2019 could range from $1.2 to $1.5 billion GR.

SB 1 only restores 25 percent of the Medicaid pediatric therapy rate cuts mandated in the 2016-2017 budget. The House version of SB 1 included a 75 percent restoration of the therapy rates, and the House version of HB 2 the supplemental bill included funds for 2017 restoration and a repeal of the directive for HHSC to move ahead seeking additional cuts; none of these positive proposals survived.
SB 1 includes funding for 735 Promoting Independence waiver “slots”, and another 276 for children in Child Protective Services custody who need long-term services and supports.  Rate cuts to some community care waiver providers and inadequate wages for personal attendant who care for Medicaid’s clients with disabilities and seniors are not addressed in the budget.
How big is that can we are kicking down the road?  This Medicaid “IOU” is not as big as the 2011 session’s IOU, which was nearly $5 billion GR when they passed their budget.  As noted above, there is no recent official public LBB scoring of the value of the unfunded Medicaid cost inflation for 2018-2019.  But based on HHSC’s Exceptional Item requests, it is expected to fall between $1 billion and $1.5 billion GR.  And, program reductions or efficiencies mandated in the riders described above assume another $426 million GR can be squeezed out of the already-lean program.
Lawmakers should expect to fill at least a $1 billion GR Medicaid hole in the 2019 session, and possibly closer to $2 billion if the costs run high and cost containment wish-lists cannot yield the required savings.
Stay tuned for more analysis of the Texas budget as details emerge.

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