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INDIANAPOLIS – By the end of this month, state officials expect about one out of every six Hoosiers will be on Medicaid, and the cost for the low-income health insurance program is causing state officials and legislators a little heartburn.
“It’s going to be the boogeyman that comes back to get us,” said Senate Appropriations Chairman Luke Kenley, R-Noblesville.
With $1.4 billion in Medicaid help from the federal stimulus program, the state’s share of the cost will actually go down over the next two years.
But eventually, the federal money goes away, and Indiana, along with other states, will face a steep financial cliff.
“We acknowledge the gap that is created by using federal Medicaid dollars,” State Budget Director Chris Ruhl said. “There is no other way to do it and cover the additional obligations we have.”
Medicaid is just one part of a state budget that lawmakers are working on after failing to reach a compromise in April. They have until June 30 to pass a spending plan.
The health care program is paid for by both federal and state dollars, according to a formula that sets match rates for each state.
State budget figures show Indiana’s share of the cost for fiscal years 2010 and 2011 is $2.5 billion, down $838 million because of the federal stimulus package.
Overall, Medicaid will cost $6 billion in fiscal year 2010 and $6.5 billion in fiscal year 2011, increases of 5 percent and 8 percent respectively.
Compared with fiscal year 2006, that is a 36 percent increase.
Enrollment has increased along with Indiana’s unemployment rate – about 10 percent in a year’s time, Indiana Medicaid Director Pat Casanova said.
“The stimulus is being used to fund services for people because we have made the commitment we are going to live within our budget and provide the same level of service and the same level of commitment,” she said. “We have not cut services and don’t plan to.”
In fact, part of the bargain for receiving the federal funds is to maintain the current benefits and eligibility.
But eventually, in December 2010, the money will run out, and the state will have to fill the gap for the first time in fiscal year 2012.
“There is a legitimate concern for states about whether the demand will disappear by the end of 2010 and if it doesn’t, how are you going to continue to meet that,” said Judy Solomon, senior fellow at the Center on Budget and Policy Priorities in Washington D.C. “In theory, if people get jobs, they are able to afford coverage or aren’t eligible anymore and the numbers go down.”
But that all depends how quickly Indiana comes out of the recession.
Kenley said there is usually a lag in which Medicaid continues to rise after the economy has stabilized.
Ruhl can point to an actuarial chart that compares adult Medicaid enrollment projections with state unemployment projections. The chart predicts unemployment rates will start to drop in January while the Medicaid enrollment line will continue to increase into 2012.
“All the states are asking these questions, and there is a variety of different speculation,” Casanova said. “We have real concerns for the future.”
Kenley said there is a $289 million gap in 2012 that legislators will have to fill if demand doesn’t drop. He said revenues are expected to grow 4 percent, which would cover the shortfall, but that wouldn’t leave new money for much else.
“I’m only 75 percent concerned,” Kenley said. “I think the federal government sees this as part of the whole medical insurance issue, and they’ll reform the system or continue to cover it in some way.”
