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State revenues shrink while costs rise
by Rep. Brad Wilson
Feb 09, 2011 | 2891 views | 0 0 comments | 11 11 recommendations | email to a friend | print
Rep. Brad Wilson District 15
Rep. Brad Wilson District 15
Last week the Legislature voted on base budgets. These budgets are the building blocks of every department’s overall budget. This year’s base budgets required across-the-board 7 percent cuts to each and every department due to a $313 million shortfall in funding. These aren’t, however, the final budget numbers. Those will come on the last day of the session after debate and study on updated revenue projections released in late February and various proposals for rainy day funds, fee or tax increases, and other revenue schemes.

One of the frustrating things about this year’s budget is that revenues are shrinking while demand for state services is growing. Public education has long occupied the top spending spot, but Medicaid is challenging that position. For those of you unfamiliar with Medicaid, this is a state-administered safety net program that provides health care to low-income and disabled adults and children.

It is sometimes confused with Medicare, which is a federal program that provides health care for retirees. Right now Medicaid requires 13 percent of the State budget, but it is projected to grow almost exponentially to 36 percent by 2020. This growth rate is three times faster than the overall growth of state revenue. New requirements in the federal Patient Protection and Affordable Care Act have only exacerbated the growth problems by greatly expanding the program while leaving states with fewer options for managing costs.

One of my legislative colleagues, Sen. Dan Liljenquist from Bountiful, has been studying the unsustainable growth of Medicaid and has proposed a plan for addressing the cost curve, with potential cost savings of $770 million over the next seven years. His plan places incentives for health services on cost and quality of care, not the number of procedures performed. By moving to a managed care model with medical homes, he prioritizes managed care over fee-for services and provides better overall health outcomes for Medicaid recipients. His plan would also limit the per enrollee growth of Medicaid to the overall growth rate of the general fund. For example, if the State’s general fund growth is 5 percent then Medicaid per enrollee growth can only be 5 percent. This way Medicaid can’t grow faster than the state can afford to pay.

One of the more interesting components of his bill would create a Medicaid specific rainy day fund. If Medicaid growth falls below 8 percent, the cost savings would go into the fund. We have seen over the last few years the wisdom of having rainy day funds for both public education and the general fund. It makes sense to plan for a time when more people than expected might need to take advantage of the safety net services Medicaid provides.

I think this proposal sounds very interesting and am hopeful it might help curb unsustainable growth within Medicaid. I will keep you updated as the bill makes it way through the legislative process. My hat is off to Sen. Liljenquist for finding fair and financially sound solutions on this difficult issue.

Brad Wilson represents House District 15 in Davis County. He is writing weekly articles during the legislative session about hot topics. He can be reached at during the legislative session.

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