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February 1998 Proposed FY 1998–99 MDCH Budget by Lisa Baragar, Consultant for Public Policy In a recent appearance before a joint session of the House and Senate appropriations committees, Budget Director Mary Lannoye presented Governor Engler’s FY 1998–99 Executive Budget, which includes proposed funding for the Michigan Department of Community Health (MDCH) and all other state agencies. The proposed MDCH budget calls for a 3 percent increase over the current year (FY 1997–98) level, raising the total MDCH allocation—federal, state, local, and private funds—from $7.3 billion this year to $7.48 billion. The proposal includes $2.5 billion in general fund/general purpose (GF/GP) monies—an increase over the current year of almost 1.5 percent. The MDCH budget for the coming fiscal year is apportioned as follows:
The proposed FY 1998–99 MDCH appropriation accounts for 23 percent of the state’s entire budget and almost 30 percent of all state GF/GP dollars. Ms. Lannoye explains that the state has kept MDCH spending in check mainly by implementing captivated Medicaid managed care. Department of Management and Budget (DMB) officials indicate that in FY 1998–99 the initiative will save the state nearly $120 million. MIChild In FY 1998–99, the state will spend approximately $95 million on the MIChild program—an initiative to provide health coverage to two-thirds of Michigan’s uninsured children (those aged under 19 and at or below 200 percent of the federal poverty level [FPL]). Nearly $64 million of these funds are federal matching dollars. The state has access to almost $92 million in federal funds during each of the first three years of the program, but state officials decided to draw down less than the full amount in the first two years (this fiscal year and next), because they estimate that enrollment will be insufficient to justify taking more federal dollars. Michigan’s FY 1998–99 share of the $95 million MIChild program is nearly $31 million; according to Ms. Lannoye, Michigan’s match will come from existing state monies that traditionally have been used to pay for medical and mental health services for children living in low-income families; the legislature will not have to appropriate any GF/GP dollars. This decision concerns some lawmakers, who worry that transferring funds from existing state programs may be illegal under federal law, which prohibits "crowd out"—deliberately excluding children from any private or public health insurance plan with the expectation that MIChild will pick them up. Other Medicaid Items The FY 1998–99 budget also includes inflationary and base increases totaling almost $75 million ($35.2 million GF/FP). DMB officials indicate that this 2 percent Medicaid budget expansion includes nearly $18 million to increase payment rates for health care professionals who render fee-for-service care to Medicaid recipients; some rates have not been adjusted in several years. The state did not raise nursing home-and hospital-reimbursement rates, because in recent years they had been increased above inflationary levels (prior to the 1997 repeal of the federal Boren amendment, federal law had required states annually to increase such institutional rates by the rate of inflation plus one percent). The remaining $57 million in inflationary/base increases accounts for increased utilization of the Medicaid system. Another substantial FY 1998–99 Medicaid budget change is the proposed $67 million GF/GP reduction and $63 million increase in total funds for "new special financing initiatives." According to DMB officials, the state plans to revise the Indigent Medical Care Program, which provides medical services to single, able-bodied adults without dependents (the former General Assistance population), so that services no longer are provided directly by physicians but by hospitals. This will allow hospitals to collect federal disproportionate-hospital-share payments for services provided to this population and eliminate the necessity for state spending on the program. Finally, the budget the proposes an $8 million reduction in total graduate medical education (GME) funds (almost $4 million GF/GP) paid to hospitals to educate medical students. Until the current fiscal year, the state had folded GME expenses into the Medicaid rates paid to hospitals for each Medicaid recipient served; this was seen as one way to give some extra compensation to hospitals that serve the state’s poor. Two years ago, the state eliminated the practice and created a separate $166 million GME pool to remunerate hospitals directly for expenses incurred in educating medical students (however, the amount of the remuneration still is tied to the number of Medicaid patients a hospital historically has served). Since its creation, the pool’s funding level has remained unchanged, but the volume of hospital fee-for-service Medicaid recipients has fallen 25 percent. To reflect the reduction, the budget proposes cutting the GME pool by 5 percent. Perhaps the biggest surprise in the governor’s proposed community health budget is the recommendation that local public health dollars be distributed to counties in the form of block grants. Mark Bertler, executive director of the Michigan Association for Local Public Health, indicates, "We were not aware of [the decision ]. . . surely it exemplifies a misunderstanding of the way local health departments operate." State and Local Cost Sharing Perhaps the biggest surprise in the governor’s proposed community health budget is the recommendation that local public health dollars be distributed to counties in the form of block grants. Mark Bertler, executive director of the Michigan Association for Local Public Health, indicates, “We were not aware of [the decision ]. . . surely it exemplifies a misunderstanding of the way local health departments operate.” Currently, up to a certain point, the State of Michigan matches every dollar that local health departments spend to provide certain basic and required services. For FY 1998–99, the governor suggests that the state cap its match at just over $37 million (up 2.5 percent from the current fiscal year). Mr. Bertler explains that by requiring counties to provide certain health services before they can receive cost-shared funds, the state ensures that every person, regardless of the county in which s/he lives, has access to a similar standard of care. Although Mr. Bertler hasn’t seen the details of the governor’s plan, his initial reaction is that block-grant funding will allow each county to decide for itself what services it will provide, and the state could end up with 83 individual health systems, each with different rules. Healthy Michigan Fund Another issue is how a portion of the Healthy Michigan Fund (HMF) shall be used. The state annually allocates 6 percent of all tobacco tax collections (projected at about $35 million) to the HMF, which, since its 1994 inception, has funded such initiatives as the cardiovascular disease prevention program and several smoking-cessation and community violence-prevention projects. Each year the state carries forward approximately $10 million to fund special public health projects; state law requires that these projects relate to such public health priorities as combating chronic illness and providing local and child health services. Back in FY 1996–97, the governor had proposed using the $10 million to partially fund the state’s share of the proposed federal Medicaid block grant program. Many people opposed this, claiming that funding Medicaid was not in line with the HMF’s purpose. After the federal block-grant initiative failed to materialize, legislators voted in FY 1997–98 to return the $10 million to the HMF. For FY 1998–99, another $10 million is being carried forward for special public health purposes, and the governor recommends using a small portion for tuberculosis (TB) surveillance in the deer population. Some experts are fearful that the disease will spread to the state’s bovine population, but public health officials maintain that bovine TB has no health implications for humans, thus it is not a public health concern, and allocation of HMF funds for this purpose would be inappropriate. Summary Policymakers generally agree that the FY 1998–99 community health budget is largely business as usual, and they are confident there will not be dissension about the amount of appropriations. Many observers, however, expect considerable debate about the governor’s recommended policy changes in regard to Medicaid, state and local cost sharing, and the Healthy Michigan Fund. |
