Senator Eliot Shapleigh - El Paso, Texas

HHS Exec Commissioner Tom Suehs lays out the grim numbers spurred by lapse of federal stimulus money and double digit caseload growth rates

As if lawmakers weren’t facing enough challenges in the upcoming legislative session, the head of the state’s social services agency said that budget writers might have to come up with an added $8 billion to $10 billion just to maintain current services in the state Medicaid program.

Health and Human Services Executive Commissioner Tom Suehs laid out the numbers this morning with brutal precision in an address to the Texas Hospital Association. Last year’s stimulus package was a godsend for the states, he said, when it came to Medicaid programs.

In Texas, the federal match for Medicaid went from less than 60 cents on the dollar to 70 cents on the dollar. Suehs said that the federal stimulus basically bailed out the states. The problem though is that as things stand today, the federal money won’t be around for budget writers to count on next year.

That’s $3.8 billion, Suehs said.

The other big driver behind Medicaid is an extraordinary jump in caseload growth, a phenomenon spurred mostly by the bad economic condition of the state. In January 2009, the annual caseload trend in the state Medicaid program was a growth rate of 2.7 percent. By the next month, it had jumped to 4 percent and two months later it was 5.2 percent.

And it hasn’t stopped growing. By the summer, the caseload trend was in the 8 percent to 9 percent range and it had broken double digits by the fall. In December, the annual caseload was growing at an 11.6 percent clip. It has dropped slightly since then, but is still bouncing around 11 percent.

These are huge numbers, Suehs said, making it nearly impossible to properly forecast how much the state will have to spend on Medicaid next biennium. He estimated, though, that it would cost roughly $2 billion to keep up with caseload growth. Suehs said that budget writers must also add in another $2 billion or so to cover caseload growth this biennium that must be addressed next year in a supplemental budget bill.

“I’m getting up to 8 or 10 billion just to keep current service,” he said.

Senate Finance Chairman Steve Ogden (R-Bryan), speaking before Suehs, laid out the situation from his perspective as one of the Capitol’s chief budget writers. He said it might be tempting to discount the significance of the increased federal match on Medicaid. After all, he said, it’s only 10 percent more in federal money.

What that doesn’t take into account, he said, is the sheer size of the state Medicaid program. In a $45 billion entitlement program, losing that added 10 percent match represents a $4.5 billion swing, Ogden said.

“One of the great unknowns is whether the feds can maintain that enhanced (match),” Ogden said. “That will have a very significant effect on what kind of budget we can write. We’re watching that.”

The dropoff in federal aid is compounded by greater than expected demand for Medicaid and other social services spurred by the sour economy. He said the key was to find some way to get the private sector back on its feet and creating jobs again. He said that while he and his colleagues have tough decisions to make next year, he promised to do everything he could to help the private sector to grow.

He added that he was troubled by what he described as a society evolving into a place where half the nation gets services for free while the other half pays for itself and for everyone else.

“Everybody needs to pay something (for services),” he said, “even if it’s just $1.”

He further urged that health care reform efforts create financial incentives to get people to act in their best interests – to not smoke, for instance, or to keep their weight under control. “The system needs to be set up to reward good behavior and penalizes bad behavior,” he said.

When dealing with next year’s budget, Ogden said two things were non-negotiable. The budget will be balanced and Ogden said he would not raise taxes to pay for it.

After tallying up the costs to keep Medicaid going at current levels, Suehs admitted that he didn’t see how lawmakers could cover a shortfall that big without growing revenue. Looking at just the loss of the stimulus money and caseload growth for next biennium, that’s $5.8 billion, he said. “Last time I looked, there wasn’t that level of projected revenue growth,” he said.

He added later, “I don’t know how you do this without taxes.”

Suehs said that he was looking for ways to find the needed money. He said that the feds might decide to extend the enhanced Medicaid match in the wake of the collapse of efforts to pass a national health care reform bill. Suehs said that he thought national reform efforts are failing but that Congress might realize it needs to help states out some more on Medicaid as a result.

In addition, Suehs said that he was looking at all local and state funds that aren’t currently leveraging federal matching funds. The goal is to find some way of making those dollars start drawing down federal funds. So far, Suehs said he’s found about $600 million to $700 million worth of unmatched local and state spending. If those dollars are leveraged, that could bring in $2 billion or maybe more. “That helps,” he said.