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December 16, 2015

Good Budget News Relating to BadgerCare and Medicaid

There was some good news this week from the Legislative Fiscal Bureau (LFB) relating to Medicaid and the potential expansion of BadgerCare. That news came on Tuesday when Senators John Erpenbach and Jennifer Shilling both released a Fiscal Bureau memo that re-estimates the potential savings from expanding BadgerCare eligibility. The new memo is very good news in two respects:

  • First and most obviously, the memo indicates that expanding BadgerCare for adults up to 133% of the federal poverty level would cover an additional 83,000 adults, but would yield a net savings for the state of more than $1 billion over a six-year period – by taking advantage of increased federal funding available for states that expand Medicaid.
  • Second, regardless of whether the state expands BadgerCare eligibility for adults, I think one can safely infer from the memo that a couple of developments over the past six months will yield substantial savings within Wisconsin’s Medicaid budget.

I’ll start first with the clear message from the memo about potential BadgerCare savings. If the expansion were to begin on January 1, 2016, the net savings for state taxpayers during the 2015-17 biennial budget period would be $323.5 million. Because that starting date is no longer a realistic option, the paper also lays out the projected fiscal effect of beginning expanded coverage a year later. Under either of those two options, Wisconsin would save an average of more than $15 million per month once the expansion took effect.

The fiscal argument for expansion is much stronger in Wisconsin than in other states because we have already partially expanded coverage for childless adults. By expanding eligibility a little more, Wisconsin would qualify for a much higher federal reimbursement rate (100% initially, gradually phasing down to 90%), instead of the current 58% federal match rate.

As I explained in a WI Budget Project blog post, the new savings estimates are somewhat lower than the LFB projections made about six months ago – primarily because the number of childless adults in BadgerCare is now about 10,000 below the previous estimate. Another significant factor is that a downturn in state income relative to other states will cause the federal share of Medicaid and BadgerCare costs to rise in Wisconsin, beginning in October 2016.

Regardless of whether state policymakers decide to expand BadgerCare at some future data, the lower-than-expected participation of childless adults should generate substantial savings, as will the increase next October in the federal share of Wisconsin’s Medicaid costs. That increase will yield a 0.36 percentage point reduction in the state share, and even though that might not sound like much, it amounts to almost a 1% reduction in the state share of Medicaid spending; and that’s a big deal.

In the short run, the recent developments that will yield Medicaid savings in Wisconsin’s may relieve some of the pressure for capturing the additional funding by expanding BadgerCare. But once we get into the next biennium and a host of other fiscal challenges confront Wisconsin, state policymakers will need to take another look at the huge savings (nearly $400 million in 2017-19) that could be realized by expanding BadgerCare, as well as the very substantial benefits for low-income working adults and for reducing uncompensated care in our state.

Jon Peacock