One of the biggest items of interest in Governor Tomblin’s proposed FY 2014 budget is Medicaid. Base budget appropriations for Medicaid totaled $568 million, an increase of $142 million from FY 2013. This increase in base budget appropriations has created the perception that the state is spending $142 million more on Medicaid than it did last year. For example, this article in the Charleston Gazette states, “The state will have to put an additional $142 million, for a total of $568 million, into Medicaid because the federal share of funding has dropped.” But base budget appropriations only account for a portion of the state’s spending on Medicaid. In addition to base budget appropriations (which include the general revenue and lottery funds), West Virginia funds its share of the Medicaid program from the Health Care Provider Tax and the Medical Services Trust Fund, both appropriated out of special revenue.
So while base budget appropriations total $568 million, appropriations from provider tax and the trust fund total $247.8 million. Altogether, the FY 2014 budget proposes spending $815.8 million of state dollars on Medicaid. Unfortunately, the Governor’s Executive Budget never adds up all of the state spending on Medicaid. Instead, it only addresses the Medicaid’s base budget appropriations, creating the confusion.
So while base budget appropriations for Medicaid are increasing by $142 million in FY 2014, it’s not entirely due to rising costs of dropping federal support. Instead, the increase in base budget appropriations is due to diminishing sources of funding from the other areas of the budget. Most of the base budget increase is due to a decrease in funding from the Medical Services Trust Fund. In FY 2013, $201.4 million was appropriated from the Trust Fund, while in FY 2014, only $65.8 million is available to be appropriated, a decrease of $135.7 million. And as the figure below shows, rather than spending $142 million more on Medicaid, as reported, the state is actually appropriating $57 million less than what was budgeted for FY 2013.
So why is the state spending more on Medicaid out of the base budget, even as the overall cost isn’t increasing? The state’s base budget funding sources for Medicaid have been inadequate for several years now. But rather than building up Medicaid’s base funding, the state relied on a number of one-time expenditures, surpluses, supplementals and the trust fund, as well as $550 million in federal stimulus dollars, to keep Medicaid funded. Now that the trust fund has been exhausted, the state is forced to appropriate more from the base budget. What looks like a huge increase in Medicaid spending for FY 2014 is actually the result of gradual growth over the past several years, but without stimulus dollars and the trust fund to cover it. So while it is misleading to blame our budget problems on Medicaid’s “exploding costs,” our patchwork way of funding the program is creating problems.
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