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Governor's Proposed Budget 2009

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OMHSAS Budget Summary and Breakout

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DEPARTMENT OF PUBLIC WELFARE (DPW)

The Commonwealth’s General Fund total expenditures are projected to grow by $706 million or 2.5%, while DPW’s General Fund spending will grow by $475 million or 5.2%. Despite constrained General Fund spending, the Department’s budget still contains expansion in program spending and maintains its commitment to ensure all Pennsylvanians currently receiving services maintain those services.

Medical Assistance
The most significant issues in the Department’s budget relate to Medical Assistance. This is part of a NATIONAL TREND. Caseloads are increasing. For FY 2009/2010, the Medical Assistance average monthly caseload of 2,022,490 assumes a 3.2% growth above the enacted FY 2008/2009 budget level of 1,960,514. Pennsylvania has the 3rd highest elderly population and the fastest growing number of persons over 85. While the elderly and disabled are only 36% of the total Medical Assistance population, they account for 69% of the Medical Assistance expenditures. Over the last 10 years, the Medical Assistance program grew at an annual rate of 11%.

The current demographics for the Medical Assistance system are as follows:

	% of Caseload	% of Dollars
Disabled	22%	37%
Elderly	14%	32%
Children & Families	59%	25%
Adults without children	5%	6%

“Big 5” Medical Assistance Appropriations

	FY 08/09	FY 09/10	Difference
Outpatient	$ 615,623	$1,018,355	$402,732
Inpatient	$ 477,563	$ 507,467	$29,904
Capitation	$2,901,401	$2,753,111	($148,290)
**LTC	$ 906,620	$1,093,180	$186,560
Medicare Part D	$ 383,646	$ 462,232	$78,586
Total	$5,284,853	$5,834,345	$549,492

** Long-term living costs for the disabled (Services to Persons with Disabilities and Attendant Care appropriations) and the elderly (Long-term Care) are funded within the new Department of Aging and Long Term Living. Please see this section for a summary on these appropriations.**

To offset cuts to health benefits and/or eligibility for medical services in this economic downturn, the President’s American Recovery and Reinvestment Act includes a separate allocation of $87 billion for states’ Medicaid programs. Currently, the federal government pays approximately 55% of Pennsylvania’s medical assistance costs. The President’s plan proposes to temporarily increase the Federal Medicaid matching rate through the end of federal fiscal year (FFY) 2010. In the latest proposal, the share of Medicaid costs the Federal government reimburses all states will increase by 4.9 percent, with additional relief tied to rates of unemployment. The Governor is estimating Pennsylvania’s share of the $87 billion would be approximately $4 billion over 27 months. On an annualized basis, the budget anticipates $1.1 billion in additional federal support in the current year, $1.9 billion in FY 2009/2010, and $1 billion in 2010/2011 to be used to offset the cost of the Medical Assistance program.

Medical Assistance Cost Containment Initiatives
The Administration is proposing to reduce the 2009/2010 Medical Assistance state fund costs through a number of Cost Containment initiatives totaling $329 million:

1) 2% Managed Care Assessment: Under the Deficit Reduction Act of 2005, states’ ability to assess their Medicaid managed care organizations (MCOs) will end September 30, 2009. Currently, Pennsylvania generates $200 million in revenues through a 5.5% assessment.

The Governor is proposing to implement a 2% assessment on all managed care organizations in the state beginning January 1, 2010. The assessment will be on those managed care organizations that participate in the MA program and those that do not. This will replace the existing Medicaid assessment due to expire by October 1st, 2009.

Total estimated savings in FY 09/10 is $200 million. Once fully implemented, this initiative will generate an estimated $400 million in state fund savings.

2) Implement “Smart Pharmacy”: Once again, the Governor will propose a pharmacy carve out or “Smart Pharmacy” program, where the Department will assume responsibility for administering the pharmacy benefits currently managed by the MCOs. The Department believes this proposal will simplify prescribing, dispensing, and claims submission for providers, maintain consumer access to quality health care, and enable the Department to receive federal drug rebates which results in substantial savings to the Department. Under federal law, the MCOs are not allowed to collect the same rebates as the state’s Fee for Service program (FFS).

Total estimated savings in FY 09/10 is $54 million. In FY 2010/2011, this initiative is estimated to generate $146 million in savings.

3) Behavioral Health Managed Care Efficiencies: During FY 08/09, the Department completed the statewide implementation of its behavioral health managed care program. The Governor is proposing to implement program modifications, such as adjusting the level of county risk and contingency funds and tightening treatment of reinvestment funds, during FY 2009/2010.

Total estimated savings in FY 09/10 is $35 million. In FY 2010/2011, the behavioral health managed care program modifications will generate approximately $10 million in savings.

4) Reduce Hospital Supplemental Payments: The Governor is proposing to reduce supplemental payments to hospitals through across the board reductions in Outpatient DSH, Medical Education, and Community Access funds.

Total estimated savings in FY 09/10 is $20 million.

5) Reduce Fraud and Abuse and Expand Third party Liability: The Department will propose a Medical Assistance false claim act, enhance the recipient restriction program, and implement other initiatives to generate an estimated savings of $15.7 million in FY 09/10.

6) Increase Access Plus Efficiencies: The Department will improve its disease management services by covering an additional 21 conditions. It will also implement a pharmacy management initiative to reduce costs and improve outcomes.

Total estimated savings in FY 09/10 is $4.4 million.

Dual Eligible Drug Costs
The Medicare Part D Prescription Drug Program took effect in January 2006. The new program moved persons who are dually eligible for Medicaid and Medicare into a new Medicare Part D prescription program. In order to fund the prescription drug costs of these dual eligibles, the Federal Government is requiring States to pay a portion of those costs. This is referred to as the “clawback” provision of the Medicare Part D program. The Administration separates these costs from the existing MA Outpatient appropriation. For FY 2009/2010, the Commonwealth’s clawback costs are $462 million, an increase of $78.6 million over current year payments.

Medical Assistance Rates
The Governor proposes the following rate increases for Medical Assistance providers:

Mental Health and Mental Retardation
The Mental Health program will receive an increase of $11.6 million over current year funding. In order to maintain current mental health services in the community, the Governor is proposing $9.8 million. An additional $2.5 million in state funds is needed to reflect changes in federal earnings. Similarly, the Behavioral Health Services program will receive an $11 million increase over current year, due to the loss of IGT funds available in the current year.

The Governor is not recommending a COLA for Mental Health Services.

Mental Health and Mental Retardation
Building on an initiative the Governor proposed in 2007, the Mental Retardation program will receive substantial increase in FY 09/10, $55.3 million: $13.6 million or a 8.5% increase for Community Mental Retardation Base Program and $41.7 million for Community Mental Retardation Waiver program services. The waiver program increases will maintain current services and provide home and community based services for 793 additional persons with mental retardation, including 500 young people leaving the special education system.

The Early Intervention appropriation includes $16.5 million to provide early intervention services to an additional 1,872 children ages birth to 3 years of age. These program services are intended to assist families in meeting the special needs of their children.

$6.9 million has been proposed to continue the current program and provide additional services for more individuals with Autism.

Community MH/MR Programs and the Early Intervention program do not contain funding for a cost of living adjustment.

Services for Children
Child Welfare funding will increase from $1.05 billion in 2008/2009 to $1.06 billion in 2009/2010. This includes $9 million to support county needs-based budgets.

In 2008-09, the TANF Child Welfare Transition appropriation will be eliminated. This appropriation received $20 million in state funding for 2008-2009.

In addition, the Governor has proposed to strengthen the Early Education and Care Initiative by providing a $12 million to Child Care Services. These funds will provide additional subsidized child care services to 3,080 low – income children and improve accountability of early learning experiences through the Keystone Stars programs ($4.6 million).

The Nurse Family Partnership program will receive an additional $3.8 million to reflect the realignment of federal funds.

The childcare assistance program provides a mechanism to monitor the quality and availability of childcare for TANF and former TANF families. In FY 09/10, Childcare assistance will receive $8.9 million for subsidized child care services for an additional 3,397 children of TANF and former TANF families.
The Governor has eliminated a COLA for the social programs during FY 09/10.

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