JLARC: Medicaid Jumps 19% In Expansion Year

Source: JLARC October 7 report on state spending over time, in this case a decade of sustained economic growth with no recession.

By Steve Haner

Every year, the Joint Legislative Audit and Review Commission issues a report looking at ten years of state spending, sliced and diced various ways. In recent years, the headline results have largely been surprisingly consistent and the 2019 report issued Monday fit the pattern. As seen before:

  • Medicaid program costs lead the charge, exploding almost 19% in one year due to the expansion that started January 1, 2019, even though the fiscal year was one-half over by then. It went from $10 billion to $11.9 billion. The average annual growth over the decade has exceeded 7% and $600 million.
  • Keeping up with Medicaid, and exceeding it in some categories, are the various forms of transportation spending. In the decade since the base year of the report, fiscal year 2010, Virginia has passed both statewide and regional transportation tax increases, and various toll projects have been completed – all flowing through the state’s books.
  • The third budget element that has seen major growth is higher education, with the vast majority of the new money coming from tuition, fees and auxiliary operations at the state schools, not state tax dollars. When all the schools are lumped together, their spending growth is right in line with the other two mega programs, and the higher education totals push past the growth in state funds transferred for local public schools. Local public schools don’t charge tuition and fees they can raise at will.
  • Virginia’s general economic performance lagged the national average for the entire decade, with average annual gross domestic product growth of 1.4% (versus 2.2% nationally), per capita income growth of 2.8% (versus 3.4% nationally) and labor force growth of 0.9% (versus 1.5% nationally.)  The GDP is adjusted for inflation.

The summary presentation was given by Ellen Miller of the JLARC staff, but the full report is worth a review.  To figure out annual changes, compare it to the 2018 version and then perhaps go back a full decade to the 2009 report. Over the years it is the consistency that surprises.  State government is Medicaid, transportation, higher education and local schools, with everything else gathering crumbs.

Click for larger view. Growth in total agency appropriations, FY10-19. The same chart for FY00-09 is below.

The state’s general fund (thanks to the below-average economic results) grows slowly, 1.6% per year over the period when adjusted for inflation and population growth. But non-general funds — tuition and fees, federal funds for Medicaid and education, transportation taxes and tolls – rose a steady 3.2% per year for a decade. Combine the two and real growth (adjusted for inflation and population) is 2.6%. Again, that is against a backdrop of 1.4% GDP growth in the same period. If not alarmed about sustainability, you should at least be concerned.

Click for larger view. Growth in total appropriations, FY 2000-09. If the higher education accounts are combined, they led growth for that decade, which saw substantially smaller growth in transportation funding. Source: JLARC

Unlike some other recent state reports, the JLARC summary does capture and include the first six months of Medicaid expansion, adding more individuals to coverage and increasing payments to providers.  The new hospital assessment revenues that comprise the state share of expansion costs are considered non-general funds, the same designation as the federal funds provided to the state for Medicaid. But looking at general fund (general tax) monies only, Medicaid growth still sucked up 39% of all growth dollars for the decade, an average of $288 million per year.

Are those hospital payments non-general funds? Should they be considered taxes? They are a percentage of hospital gross receipts, a traditional taxation method. But the dollars flow into and then out of Medicaid accounts, never leaving that program. Keeping them out of the general fund allows its growth to appear more constrained.

In another part of the meeting, JLARC staff reported that its review of the state’s process for determining Medicaid eligibility was largely positive. The decision to expand the program last year, increasing the income cut off to 138% of the poverty level and allowing working-age adults without children to apply, did create a rush of processing, but staff was added and delays few. It is possible to apply for Medicaid on the same federal web portal used to enter Affordable Care Act programs.

Priority was given to individuals already in partial-coverage programs, helping them transition into full coverage. Those smaller programs helped individuals with mental illness, substance abuse disorders, and family planning services. Also fairly easy to process were parents who already had children on Medicaid and some recipients of the food program SNAP.

The one possible problem identified by JLARC is many individuals were placed in the enrollment expansion population when they actually qualified for regular Medicaid, using the rules before expansion. There is a higher federal reimbursement rate for people picked up under expansion, but the federal government may balk at paying that for people who belonged in the main program. Corrections to those assignments are being made, the staff reported.

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11 responses to “JLARC: Medicaid Jumps 19% In Expansion Year

  1. re: ” Are those hospital payments non-general funds? Should they be considered taxes? ”

    same with the 90% Federal funds for the expansion and the transportation funding that comes from earmarked taxes both State and Federal.

    so yes – the budget shows increased expenditures but the increased funding from the Feds is not well delineated so if you just look at the “out” and “in” and revenues have increased to fund more “out” – without looking where those increased funds came from – one might think it was increased taxes in Virginia – like those hospital taxes, but the other 90% came from the Feds not Virginia taxes.

    All of these taxes – by the way – go directly back into the Virginia economy through healthcare providers and related and road building and maintenance, etc.

    re: the ACA sign up process that essentially does triage to decide what program the applicant is eligible for – the ACA or Medicaid or the Expansion.

  2. Slow growth and runaway spending for the past decade… I’ve been saying for a while that Virginia is becoming New Jersey. Maybe I got it wrong. Maybe Virginia has already become New Jersey.

  3. Four weeks and we find out for sure.

    Yes, Larry, the government spends my money much more wisely than I might. You believe that, I don’t always think so. And in my mind there is no difference between state spending and federal spending, except that federal spending is deficit dollars so it’s my grandkids who pay. But that was basically one of my commentary free, just the facts ma’am reports, and I’m sure the readership stats will be low….

    • No Steve – I do NOT think the govt spends “your” money more wisely than you but then I don’t think you (collectively) do either when you buy too much house for what you can afford, don’t buy insurance so you can buy other stuff… lottery tickets… Bahama vacations.. etc.. but not enough in your retirement plan and count on Medicare to take care of you when you do retire…

      And you ARE correct – there is little difference between State and Fed spending except for one difference. The Feds can and do give you a tax cut and pay for it with deficit debt.. and I never hear you make that point when you talk about how great the TCJA is and how bad Northam is in keeping “your” money!

      In the last POTUS administration – there was piling on about the deficit and debt… yep.. in this one… crickets..

      I HATE taxes also – but we have to pay for things we do need and I’m just not going to blindly be opposed to any/all taxes. Some taxes actually SAVE us money or have us pay-up-front instead of deferring it to later when it costs even more.

  4. I don’t think it can be repeated often enough, Medicaid is the program that ate Virginia’s budget. As an entitlement, it is crowding out spending in every other area. The Commonwealth Institute for Fiscal Analysis has made much of the fact that state support for K-12 education, adjusted for inflation and the number of students, is lower than it was 10 years ago. Why? Is it because legislators no longer consider K-12 a priority? Or because a metastasizing Medicaid budget claims the lion’s share of revenue growth dollars?

    • MedicAid IS …. VOLUNTARY. We CHOOSE to have MEDICAID!

      There is massive conflation between original MedicAid and the expansion.

      Original Medicaid does NOT provide “entitlements” to able-bodied adults. The vast majority of it goes to the handicapped, the elderly and moms with kids.

      what would you do differently that help them?

      It’s NOT that the state considers K-12 a lower priority – there is more than one need and they do compete.

      What are you going to do? Portray those kids in elementary as “better” than the handicapped ones that can’t attend K-12? geeze.

  5. One more point to emerge from Steve’s snapshot of the JLARC report: It takes economic growth to pay for expansive government programs. If you have slow economic growth, as Virginia has, there’s less state revenue to go around — unless, of course, you raise taxes… which only hurts future economic growth.

    • taxed money goes right back into to the economy…just as if you spent it on a toaster.

      so you do without the toaster so you can have streets or care for handicapped. One less toaster builder employee and one more handicapped care employee.

      there no black hole that taxes go into never to reappear as Supply Side economics thinks. When you cut taxes, you cut teachers and you cut spending by those teachers. Ask Kansas.

      • So, Larry, 100 percent tax on 100 percent of income or transactions would produce the best result? That’s your position? There is no point of diminished returns?

        And that was one of the main points of the expansion, Larry, to offer this coverage to working age adults either with or without dependent children. Hence the counter proposal, if we’re going to do this let’s at least ask that population to look for a job or use the time to get trained for a job.

        • Steve – do I put words in your mouth? 😉

          No – we do not want the govt in charge of all production but that does not mean the less the better either except in some folks minds!

          And I could even be okay with that if they had a consistent argument about it in terms of what govt should not do and what govt must do because the private sector will not do it.

          I actually AGREE with you on the work requirement but I disagree with the WAY Conservatives characterize the expansion as if it is an unearned entitlement , a wealth-transfer coming out of the hides of those who work and get EP as a benefit.

          As long as we say we will not turn people away from hospitals – we have instituted what youse Conservative types call a “moral hazard” and so we basically guarantee health care – but of the worst kind – the kind that lets an emerging condition evolve unfettered into a life-ending threat, that costs 5-10 times what it would have – had they had regular medical care.

          And we make all kinds of lame excuses like it will cause a shortage of doctors (as if we can’t bring on nurse practitioners and physicians assistants, satellites clinics, etc.

          I’m opposed to providing insurance to the able-bodied who do not work – but I will point out that those guys get sick and go to the ER also.

          33 other countries don’t discriminate on that basis – and they all live longer than us and pay 1/2 what we do and yet Conservatives insist it’s “socialism” and we can’t do – then we do it but in the most expensive way possible.

          Somewhere in the middle of this mélange is a concept called “fiscal conservatism” were put aside partisan idiocy and seek practical solutions.

          Used to be fiscal conservatism and social moderation were considered “good” things – now – they are the enemy!

          We’re not THAT far apart and I actually think we are closer on issue that you are with the mainstream GOP these days!

    • Economic growth comes from productivity. That’s not a partisan concept but it’s increasingly one that is made partisan.

      Government programs can actually increase productivity – yes.

      Education is at the top of the list and that spurs R&D (paid for by taxes) that then produces things like satellites, internet, drones, facial recognition, AI, weather forecasting…. dozens and dozens of major areas of science, engineering and industry – and yes – also $600 toilets just like Edsels and New Coke!

      It’s not 100% govt nor 100% private sector. Defending the govt part of it does NOT mean advocating 100%!

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