Growing Medicaid costs in Iowa worry Branstad

Federal formula for Medicaid funding is penalizing small states like Iowa, governor says

DES MOINES – Gov. Terry Branstad expressed concern Monday that government health care programs such as Medicaid are taking a larger bite out of the state budget.

Branstad said the federal formula for calculating Medicaid cost shares is penalizing states like Iowa that have growing economies by shifting a greater share of program costs from the federal government to state budgets.

“If your economy is in the tank and your state is badly managed, you get more money,” he said. “That’s not the way we want to run things in Iowa.”

Branstad noted that Medicaid used to make up about 12 percent of the state budget when he was governor in the 1990s, but now it is approaching 18 percent and could go higher under federal plans to expand the program’s coverage in fiscal 2014.

Under the current formula, he said, Iowa’s share of providing Medicaid services will grow by $57 million in fiscal 2014 and by $31 million in fiscal 2015 independent of federal plans under the Affordable Health Care Act to expand Medicaid to another potential 140,000 recipients in Iowa.

“We’re concerned that Medicaid has been the biggest growing cost to state governments,” said Branstad, who has joined with other governors in seeking flexibility in instituting federal health reforms in order to avoid extra state spending. He said his administration is “very careful and cautious about buying into federal mandates” that may not be affordable as the president and Congress work through so-called federal cliff financial challenges to cut national deficit and debt.

“This is a Cadillac program. The problem is it is a rusted-out Cadillac,” Branstad said of the current federal Medicaid cost-share approach with states. “We’d like to be able to have a new program that we could together consistent with our philosophy of being the healthiest state where we partner with people and people contributed some to their own health, and then the state also assists them as opposed to a federal program -- which is an entitlement where it’s the government’s responsibility and I have no obligation or responsibility for my own health. That’s something we’re trying to change.”

State lawmakers, who knowingly underfunded the state Department of Human Services (DHS) budget for the current fiscal year due to a dispute over abortion funding, will be asked once they convene the 2013 session in January to pass up to $45 million in supplemental funds for the current year that runs through June 30.

The two-year DHS state budget request – approved by the Iowa Council on Human Services -- seeks a 12.9 percent funding boost for next fiscal year and a 7.9 percent hike in fiscal 2015, but DHS officials note that the $206.65 million requested increase for fiscal 2014 is somewhat skewed by the underfunding issue, the state takeover of some county mental health costs, and a drop in the federal Medicaid match rate that will shift costs to the state. Without those factors, the DHS proposed increase in state general fund appropriations for fiscal 2014 would have been between 3 percent and 4 percent.

Also Monday, Jason Glass, director of the state Department of Education, presented a status-quo fiscal 2014 budget request that provided no new money for general aid at Iowa’s community colleges and a zero percent “allowable growth” provision for K-12 schools.

Glass noted that “cost models” are still being developed for education reforms that will be part of the governor’s 2013 legislative package and biennial budget proposal which likely will include a “substantial” increase for new initiatives that would be phased in over a period of years if approved by lawmakers.

At a separate agency budget hearing Monday, Teresa Wahlert, director of Iowa Workforce Development, said IWD officials are trying to erase a projected $4 million shortfall in projected fiscal 2014 revenue that is due primarily to declining federal resources. She said talks on federal sequestration could boost that projected deficit to nearly $8.3 million depending on how negotiations aimed at avoiding a so-called fiscal cliff turn out. Wahlert said her agency currently has 1,166 virtual access points statewide with more than 10,000 workstations for Iowans to use in accessing IWD services.

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