Medicaid faces shortfall of $308 million

The state health agency is projecting a $308 million shortfall in Medicaid funding, the government health insurance program for the poor, state Department of Health and Hospitals Secretary Alan Levine said Monday.

Levine goes before the Joint Legislative Committee on the Budget today to outline the problem and how health officials propose to bring the current fiscal year spending back in line.

The agency plans to dip into some federal stimulus dollars set aside in a reserve account and use some other one-time money to close some of the hole.

Private physicians, hospitals, pharmacists and other private health-care providers will be shielded from budget cuts this time around, Levine said. Most of the reductions would occur on the public provider side such as in health units and mental hospitals, he said.

The state Medicaid program is budgeted $6.5 billion for the state fiscal year that ends June 30.

The $308 million shortfall is federal and state funds combined. About $59 million in state funds would be needed to close the gap, Levine said.

“It’s a big deficit,” Levine said in a telephone interview Monday night. “But I think there’s some good news in it. Much of this we believe is nonrecurring.”

About $120 million of the shortfall is related to higher spending because of increased medical billings associated with the H1N1 influenza virus, Levine said.

Another part is because DHH could not implement budget savings built into the spending plan until later than anticipated, Levine said.

One of the delays was associated with hospital admissions and time limits on hospital stays, he said. In addition, there were rate reductions to private providers that could not be implemented until a month into the budget year, he said.

Implementing of a new “resource allocation” program to determine the level of community support needed by the elderly and developmentally disabled has run into problems, Levine said.

The new individual care plans — many of which reduce hours of services and thus spending — are being challenged. Until appeals are settled, Levine said the state must continue providing the higher level of care.

Other contributing factors to the deficit projection included increased Medicaid enrollment and usage as well as higher pharmacy program spending, DHH Undersecretary Charles Castille said.