Medicaid Costs Causing Illinois State Budget to Burst

The state of Illinois could be facing a $21 billion Medicaid bill by the end of its fiscal year in 2017, according to a report released from the Civic Federation, a nonpartisan policy group. The state is already predicted to spend approximately $14 billion, nearly half of its entire budget, on the program this year, with costs anticipated to go up 41 percent over the next five years. Illinois Governor Pat Quinn has only accounted for a 13 percent increase in budgetary spending, leaving Illinoisans wondering how the state is going to pay its bills.

Illinois’ Medicaid program is one of the most vast out of all the states in the Union, with nearly $15 billion combined spending per year from the state and the federal governments. Twenty percent of state residents are on Medicaid, as well as one out of three children. Half of all births in Illinois are covered by the program. Statistics like these are not a surprise to those who find the Illinois income requirement lenient; those whose incomes do not exceed 200 percent of the federal poverty level, $44,700 for a family of four, are eligible for Medicaid.

In 2011, state lawmakers attempted to address the budgetary crisis by increasing personal income taxes by 67 percent and corporate income taxes by 48 percent. Despite the escalation in revenue, the Medicaid program was underfunded by nearly $1.5 billion in fiscal year 2012. Recently, the state’s inability to meet its financial obligations was acknowledged by credit rating agency Moody’s, which downgraded Illinois’ rating from A1 to A2.

Also last year, Illinois lawmakers attempted to cut costs by addressing fraud in the program by making eligibility requirements more stringent. The reform bill required Medicaid beneficiaries to provide proof of income by submitting a month’s worth of pay stubs instead of the current requirement of a single pay stub. Legislators rationalized that applicants could mislead the program by submitting one pay stub that was artificially low, when they actually earn more than the maximum income allowable. A month’s worth of stubs would present a more accurate picture of the individual’s income and residency. However, the federal government claimed that the bill was illegal and it was rejected.

Under the federal health care reform legislation, the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), states were prohibited from increasing Medicaid eligibility requirements after PPACA was enacted in 2010. The Centers for Medicare and Medicaid (CMS) concluded that Illinois’ bill was an eligibility restriction, and thus void.

PPACA further compounds Illinois’ Medicaid crisis by making the program accessible to more residents. At first, the federal government will completely cover the cost of Medicaid coverage for residents who newly qualify as a result of PPACA reforms; however, Illinois must pick up half of the bill for those beneficiaries beginning in 2016.

Other attempts have been made at cutting costs in the program, including Governor Quinn’s proposals to reduce provider and hospital reimbursement rates and to abolish a state-funded seniors’ supplemental prescription drug program. Both proposals were turned down by the General Assembly. Additional proposals have included the movement of developmentally disabled persons from state-run institutions to community settings and the enrollment of program beneficiaries in managed or coordinated care networks. The Civic Federation supports these proposals as well as the tightening of control over expensive prescription drug costs.

There is one thing that all parties can agree on: If Illinois does not stabilize its budget and control Medicaid costs in the very near future, economic recovery in Illinois is all but improbable.