This past week Governor Ricketts returned the budget passed by the Legislature with several line item vetoes reducing spending. Included in the additional reductions was a 0.5% reduction in the operations budget of any agency that had not received a 3% or greater cut by the Legislature, excluding K-12 education and corrections. Additionally, the total appropriation for the Medicaid program was reduced to the original recommendation made by Governor Ricketts in his proposed budget in February. The Legislature passed a budget which had increased that appropriation above the request of the Department of Health and Human Services, which manages Medicaid.
Some members of the Legislature attempted to override the line item veto of the additional appropriation to Medicaid, but the Governor’s recommendation was ultimately sustained. As a member of the Appropriations Committee, I supported the original budget proposal from DHHS throughout the budget process, and did not vote to increase their spending above their request.
Opponents of the line item veto preyed upon misinformation and fears of the public to make their case for increasing the appropriation, rather than the facts. Care of Nebraska’s most vulnerable population is an important priority. Medicaid is the second largest expense in Nebraska’s General Fund budget, and is a program that has seen significant improvement in management of its resources in the past two years. This careful management has resulted in excess appropriations which have been returned to the General Fund over the past two fiscal years.
Any claim that the reduction to the total appropriations to Medicaid automatically results in lower reimbursement for services to providers is false. The Legislature does not set specific rates for reimbursement in the General Fund budget. A block of money, totaling $833 million, is appropriated as a pool to the Department of Health and Human Services. DHHS uses that money to fund the state’s portion of Medicaid expenses. That total amount needed to provide those services is based on a forecast that projects the total needs of the program during the coming two year budget. Appropriations are not made to a specific provider type or service, but rather to the entire budget program as a whole.
How the pool of money in the Medicaid budget is spent is a product of three factors. First are the provider reimbursements, which is the actual fee schedule for specific services to Medicaid patients by physicians, disability service providers, nursing homes, and other Medicaid service providers. There fees are determined by complicated rate studies which must be approved at the federal level by the Center for Medicaid Services. The federal government has extensive oversight over these rate schedules, since a percentage of the total reimbursement is paid for by the federal government. The federal share is determined by a factor known as the FMAP.
Medicaid is an entitlement program driven primarily by the other two factors that determine how the total appropriation is spent: enrollment and utilization. Enrollment refers to the number of people who participate in the Medicaid program in Nebraska. Nebraska has experienced steady to flat growth in enrollment in recent years. The third component of the equation is the utilization factor, which is the total costs to the state per enrolled Medicaid patient.
Thus, Medicaid does not operate from a fixed budget. It is a dynamic interaction of all three factors. Throughout the budget process, I have been carefully examining the total needs of the Medicaid program as a member of the Appropriations Committee. This has included discussion with DHHS CEO Courtney Phillips and Medicaid Director Calder Lynch. Through careful management and responsible budgeting on their part, they are able to successfully manage the Medicaid program with the $833 million proposed by the governor and ultimately sustained by the legislature this week. Their management approach to make better use of every state dollar is exactly the kind of process improvement that reduces excess and waste in government, while still meeting the obligations to our most vulnerable citizens.
Careful, thoughtful, and evidence based analysis is critical to all spending decisions. While political rhetoric makes for interesting headlines, prompts social media action alerts, and motivates voters to engage, if it is not accurate it complicates productive discussion and grinds effective government to a halt. To make the most responsible decisions for all Nebraskans, both those dependent on state programs and those paying taxes, I must actively seek and operate from accurate data and information. I encourage citizens to aggressively question information as well.