Iowa officials increasingly worried about Medicaid shortfall

Iowa will be moving into uncharted budgetary waters next month if the split-control Legislature is unable to approve supplemental Medicaid money to finish out the fiscal year due to an impasse over taxpayer funding of abortion procedures, a top state official says.

The state's share of Medicaid funding averages about $3.5 million a day for a program that covers about 450,000 Iowans – mostly children, elderly and disabled recipients. Given the level of service demand, David Roederer, director of the state Department of Management, said the money lawmakers appropriated last session will run out in early June unless additional funds are appropriated soon.

“To me, this is critical,” Roederer said in an interview.

Legislators left the Capitol last year without finalizing the health and human services budget for the current fiscal year when some House Republicans insisted on banning public funding of abortion in relatively rare instances in which a doctor deems it necessary and a woman doesn't have money or insurance coverage to pay for the procedure.

The impasse was not resolved in the 2012 election, in which Democrats managed to maintain a 26-24 edge in the Iowa Senate and Republicans saw their majority slip to 53-47 in the Iowa House. Now lawmakers face an approaching deadline to provide supplemental money to fund Medicaid services through June 30.

State budget experts say an additional $35 million to $59 million will be needed to cover a potential Medicaid shortfall, with a projected midpoint of $47 million.

“We've never gotten into a situation where we've run out of money and it doesn't look like there's other money coming. I don't think that's ever been the situation. It could very well be now,” Roederer said.

“To me, that was one of the significant things that didn't get done last year and we're right back where we were. Nothing has changed. They still can't pass anything on abortion,” he added.

Roederer said managers in the state Department of Human Services already have halted hiring except for essential positions and taken other cost-cutting measures to conserve funds but a day of reckoning is coming soon when the state's allotment to match the federal government 58 percent will run out.

Jennifer Vermeer, DHS Medicaid director, referred questions Thursday regarding the state's future course of action to Roederer, saying: “We're working with them to try to figure out what the implications and options might be. I don't have a pat answer for you right at this moment. It's not something that comes up every day.”

Since Medicaid is a federal-state entitlement program, services “in theory” will have to be provided, meaning the state will be encumbering costs with no legislative authorization to match that money, Roederer said.

The alternatives would be to temporarily stop paying Medicaid providers or curtail services which likely would mean greater demand on hospital emergency rooms for charity care at a much-higher cost – options that Roederer said would be problematic and might precipitate a response from the federal government.

“I don't think that would be the responsible thing to do right now, but I also don't think it's the responsible thing not to get this worked out. My nightmare is that it doesn't get worked out and they adjourn,” he said.

“That's why while we're going through this period of time I want the department to be extremely careful about how they're spending their money because we may have to use some of those funds at least to bridge that gap,” he added.

Rep. David Heaton, R-Mount Pleasant, co-chairman of the Legislature's health and human services budget subcommittee, said legislative leaders have to settle on an overall budget number for fiscal 2014 with the governor before money can be allotted in each spending area. Sen. Jack Hatch, D-Des Moines, the other subcommittee co-chair, said the House and Senate are about $70 million apart on the bill's overall funding level.

“We understand that we've got to get this budget moved and resolved and agreed to,” Heaton said. “I'm convinced that we'll get a bill out of here before we get ourselves in trouble.

That assurance was little comfort to Roederer.

“Everybody keeps saying don't worry, something is going to happen. But they said that in January, they said that in April when they left last year that we'll be able to take care of it. Every time I meet with leaders I say, folks, we've got to get this resolved,” he noted. “To not fund an obligation you know you have coming is problematic. That starts taking on more of a Washingtonian type of activity.”

Rep. Tyler Olson, D-Cedar Rapids, ranking member of the House Appropriations Committee and chairman of the Iowa Democratic Party, said abortion controversy that impedes Medicaid funding is going to have “real consequences” for Iowans that rely on government aid for essential services.

“House Republicans have to decide whether they're going to hold up funding for Iowans that need basic services over an extreme social agenda,” he said. “At the point they make that decision, we'll be able to get a deal done and wrap up the session.”

The irony, Roederer said, is the state may have to confront this situation at a time when there is about $900 million in surplus money in the state treasury. “This isn't about not having enough money to do it. You've got two philosophical differences, and somehow those philosophical differences have got to be bridged for what I would consider the greater good,” he said.