Kaiser Daily Health Policy Report Examines Medicaid Budget Shortfalls in Iowa, West Virginia

Like many states, Iowa and West Virginia are facing Medicaid budget gaps this year. The following summarizes recent developments on this issue in the two states.

• Iowa: Gov. Tom Vilsack (D) last week approved portions of a bill (HF 2245) that address the state's $62 million Medicaid budget shortfall, largely by transferring to the program $48.5 million from the state's Senior Living Trust Fund, which is meant to make improvements in services for seniors, and $2.5 million from the state's share of the national tobacco settlement. The transfers Vilsack approved do not cover the entire budget shortfall for this year; Vilsack vetoed a measure that would have increased Medicaid beneficiaries copayments for prescription drugs by $1 and a provision that would have required beneficiaries to report changes in income each month. The savings measures Vilsack approved last week also do not address next year's Medicaid shortfall, which is expected to be between $93 million and $114 million (Okamoto, Des Moines Register, 2/9). In other developments affecting the state's Medicaid program, Vilsack on Feb. 11 urged state lawmakers to use $120 million from the state's rainy-day fund to balance the overall state budget, saying that if lawmakers did not agree to the plan, he would have to make a 2.6% across-the-board cut. If lawmakers approve the plan, however, Vilsack said he would protect all state programs from further cuts this fiscal year, and the Medicaid program from cuts this year and next (Okamoto, Des Moines Register, 2/12).
• West Virginia: State Health and Human Resources Department Secretary Paul Nusbaum on Feb. 7 testified before the state Senate Finance Committee that Medicaid will have a $187.3 million budget shortfall in the 2003-2004 budget year (Kabler, Charleston Gazette, 2/8). By the end of the current fiscal year on June 30, Medicaid expenses are expected to be about $1.6 billion, and expenses could increase by $500,000 per year in the next four years, Nusbaum said. He said the projected budget shortfall in 2003-2004 in part includes losses of $11.3 million from the phaseout of a care provider tax, $5 million because of a medical malpractice insurance premium tax credit and $10.1 million from a 3% cut in general revenue spending. The shortfall also accounts for a readjustment in the Medicaid federal matching fund rate and a $16.8 million increase in "obligation costs" for the program, Nusbaum added. He said the Health and Human Resources Department is reviewing Medicaid eligibility limits and expenditures and soon will present various alternatives to solve the budget shortfall -- including reductions in the programs' services -- to lawmakers (Wallace, Charleston Daily Mail, 2/8).