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July 1998 MDCH Budget Talks to Resume in September by Lisa Baragar Katz, Consultant for Public Policy The debate over the fiscal year (FY) 1998–99 health budget in Michigan supports the contention by many that health care will be a reigning issue during this election year. To date, Senate Bill 908, which sets appropriations for the Michigan Department of Community Health (MDCH), is the only department budget that has not been finalized. The bill was referred to conference committee on June 30, but despite heated debate, conferees failed to reach an agreement before adjourning for the summer. Talks will resume in September. The governor-recommended and Senate-approved (substitute S-1) budgets differ substantially from their House counterpart (substitute H-1) both in terms of funding and policy. Unless the differences are resolved by September 30, the current year’s budget will carry over into the new fiscal year until a solution is reached. The following is a discussion of some of the more controversial matters. Dollar Dance Funding levels are the most immediate difference among the executive branch recommendations and the two chambers’ versions of SB 908. While Senate-approved appropriations closely resemble Governor Engler’s FY 1998–99 proposal, House-approved appropriations exceed it substantially.
>The House substitute also exceeds the community health budget revised "target" ($2.54 billion)—the funding level within which the House, Senate, and executive branch agreed to keep GF/GP appropriations—by 3.3 percent. The Senate and executive GF/GP allocation each is $20 million under the target. Local Public Health One major matter of contention between House and Senate conferees is funding for local public health departments. Currently, the State of Michigan matches every dollar, up to a total of $36.4 million, that local health departments spend to provide such basic required services as immunizations and communicable disease control; this is referred to as cost sharing. Governor Engler recommended that the state, instead of matching local expenditures, give local public health departments their money in the form of operations block grants; he proposed that for FY 1998–99 the state cap these grants at $37.3 million (up 2.5 percent over the current fiscal year’s cost-shared dollars). According to Mark Bertler, executive director of the Michigan Association for Local Public Health (MALPH), opponents of the proposed block grants say that they undermine the purpose of cost sharing, which is to ensure that every citizen, regardless of where s/he lives, has access to a similar standard of care. Supporters counter that the block grants will give health departments the flexibility they need to best address local health concerns. The Senate adopted the governor’s funding increase but kept it as a cost-sharing item. To encourage discussion, however, the Senate left intact most of the governor’s block-grant language; the House subsequently eliminated the block-grant language and also raised the cost-sharing cap to $44.7 million ($7.4 million above the governor’s proposal). MSS/ISS Another concern is how the state funds Maternal Support Services and Infant Support Services (MSS/ISS) (both Medicaid programs). Some legislators argue that the help people receive through these programs depends on which local public health department serves their area. Many also believe that Medicaid managed-care plans have no incentive to provide MSS/ISS services because (1) payment for them is incorporated into a single capitated fee, and (2) the MDCH does not have their sources to engage in appropriate monitoring. To address these and related concerns, a House budget work group developed language to create a fee-for-service/bonus payment for qualified health plans (QHPs—plans with which the state has contracted to deliver Medicaid managed care) if their providers appropriately render MSS/ISS services. The provisions include $8.9 million in GF/GP funding for the initiative. Opponents argue that it is clear in the plans’ contracts with the state that the services are required, and lawmakers should not feel obligated to pay a bonus to QHPs that are properly rendering these services. Medicaid Reimbursement The reimbursement level for QHPs that provide Medicaid managed-care services also is in dispute. The governor recommended, and the Senate agreed, that the FY 1998–99 figure be the same as the current FY reimbursement level ($1.25 billion gross, which includes $581 million GF/GP). The House, however, raised QHP funding by $8.4 million GF/GP, which would entitle the health plans to an additional $9.4 million in federal funds. The main concern, says Susan Garcia, deputy director of the Michigan Association of Health Plans (MAHP), is not whether but where the additional funds should be appropriated: to all QHPs or just to those in the original five-county area (Wayne, Oakland, Genesee, Macomb, and Washtenaw counties), where Medicaid managed care initially was launched. Supporters of appropriating the additional funds to just the five initial health plans say these organizations should be compensated for the losses they incurred during the transitional phase to managed care. Long-Term Care "Long-term care (LTC) issues also are highly controversial," says Patricia Anderson, assistant vice president of reimbursement for the Health Care Association of Michigan, "especially when it comes to wage pass throughs for nursing home employees." Last year, a 50-cent wage "pass through" was approved for nursing home employees. This allowed nursing homes, for example, to raise an employee’s wage from $6.91/hour (the 1996 average) to as much as $7.41 an hour. The state then reimbursed the facility for the cost of the wage hike, based on the facility’s Medicaid funding. If, for example, 70 percent of a nursing home’s funding came from Medicaid, the state would reimburse 70 percent of the facility’s 50-cent (or smaller) increase. For FY 1998–99, the governor and Senate prefer to continue the 50-cent wage pass through, but the House wants to raise it to 75 cents, which would cost an extra $19.1 million GF/GP but would generate an additional $21.3 million in federal funds for nursing homes. Supporters argue that higher wages reduce nursing home employee turnover; opponents say continuing the 50-cent pass through is sufficient. Another LTC issue is managed care. The governor and Senate support language permiting capitated LTC managed care, but House members are opposed, saying they want more detail on how to implement such a transition. Other Paul Reinhart, director of the Office of Health and Human Services for the Michigan Department of Management and Budget (DMB) points out that besides the additional appropriations contained in substitute H-1, the bill differs from the Senate version and governor’s recommendation in that it assumes that the state will see an additional $9 million in savings from early retirements in FY 1998–99; the Senate and governor assume no savings. Also, both the House and Senate substitutes anticipate lower Medicaid inflation ($7.3 million and $6.1 million, respectively) than does the governor ($8.4 million). Reinhart explains that these differences also must be resolved before the budget can move forward. Conclusion As Geralyn Lasher, spokeswoman for the MDCH, points out, although policy, money, personalities, and politics all played a role in stalling the community health budget, in the fall the conferees will put the past behind and start anew. |
