April 19, 2016

Good News on BadgerCare Enrollment and Budget 

There have been a couple of items of good news this month for Medicaid and BadgerCare: enrollment is up, and projected spending is down. That’s an unusual but very welcome combination of trend lines. The increase in BadgerCare participation offsets a gradual reduction over the second half of 2015, and the reduced estimate of Medicaid spending (-$85 million in the state share alone) improves the prospects for keeping a precariously balanced state budget in the black.

BadgerCare enrollment jumped by 2,600 in March and grew by nearly 5,800 over the last two months, and the timing of that came as a surprise. I had been anticipating a significant increase in BadgerCare participation during the last open enrollment period for Marketplace plans, which ended on January 31, but that didn’t happen. Instead, BadgerCare participation among children and parents fell by more than 2,900 from the end of October through the end of January.

Perhaps the delayed upturn in enrollment is because it takes longer than I thought for some of the applications to move through the pipeline. In any event, here’s what our analysis reveals about enrollment trends:

  • The number of children in BadgerCare (including Transitional Medicaid) increased by more than 2,500 over the last two months and shows a net increase of 1,370 since October. It’s now at its highest level since March 2015.
  • The number of parents in BadgerCare grew by more than 800 in February and March, but is down by 934 since October.
  • BadgerCare participation among adults without dependent children is up by more than 4,500 since October, and is almost back to where it was in May of 2015 (but is still about 10,000 below the peak in March 2015).
  • Total BadgerCare participation is almost 5,000 higher than it was in October, before the last open enrollment period started, but is still about 3,300 below the level in May 2015.

Despite the upturn in BadgerCare enrollment, a March 31 quarterly report from the Department of Health Services (which was just posted online today) projects that state spending for Medicaid and related services during the current biennium will be $85.2 million less than the state budgeted. That amounts to $12.6 million less state spending than state budget writers estimated three months ago.

It’s much too soon to bank on those savings, especially at a time when enrollment is rebounding, but the new quarterly report is welcome news. As I explained in a recent WI Budget Project blog post, state tax revenues dropped sharply in February, and downward revisions to some national economic forecasts suggest that the biennial revenue estimates made in January might have been a bit too high. If that proves to be the case, lower Medicaid spending could help state policymakers keep the budget in balance.

In light of the rebound in BadgerCare enrollment, how is it that the latest quarterly report projects lower Medicaid spending than the one issued three months earlier, and $85 million less than the budgeted level?   There are at least three significant reasons:

  • According to DHS, “managed care costs and nursing home utilization have trended lower since the last quarterly report.”
  • The latest growth is a rebound after a long period of declining enrollment, so the upturn isn’t likely to represent a sustained upward trend.
  • The department reported in the previous quarterly report that an increase in the federal match rate (because of slow income growth in WI) would save the state $23 million during the last nine months of the current biennium.  (Read more here.)

The quarterly report from Secretary Rhoades cautions that the projected $85 million balance amounts to only 1.5% of the budgeted spending – a variance that “represents less than two weeks of Medicaid expenditures.” Over the months ahead, I’ll be one of many people watching the enrollment trends to see if there’s an ongoing upturn in BadgerCare enrollment that could cut into the projected savings.

As I explained in the Budget Project blog post last week, I think the much greater risk for Wisconsin’s Medicaid budget is that Congress and the next President could make large cuts in Medicaid funding. But for now, let’s enjoy the fact that there’s a cushion in the state’s Medicaid budget, even after a rebound in BadgerCare participation. The enrollment upturn – when coupled with the growth in Marketplace coverage – should help our state make further progress toward the goal of cutting in half the number of uninsured Wisconsinites.

Jon Peacock