Governor's Budget Proposes Full FamilyCare

Gov. Rod Blagojevich’s proposed budget for state fiscal year 2006 (July 2005 through June 2006), announced on February 16, comes amid the ongoing fiscal crisis, featuring a revenue shortfall that the governor pegged at $1.1 billion and others estimate as high as $2 billion. Nevertheless, the budget proposal on health care issues contains positives for vulnerable people and families, although it also contains some targeted cuts.

FamilyCare

The governor proposes to increase the eligibility level for FamilyCare from 133 percent of the federal poverty level (133 percent is about $25,000 per year for a family of four) to 185 percent (about $35,000 per year for a family of four). The increase would be effective on January 1, 2006. This would offer eligibility potentially to about 75,000 more families.

This proposal, if it stays in the final budget, would complete the promise that the governor made in his first State of the State message two years ago to implement FamilyCare fully over three years. In that first budget, he increased eligibility from 49 percent of the poverty level to 90 percent. Last year he increased it to 133 percent (effective in September 2005). This year’s third and final increase would complete the implementation of the full program authorized by the federal government, under which the federal share of all program costs is 65 percent.

This final group of FamilyCare families will be able to take advantage of a unique “premium assistance option.” That option allows the family a choice between coverage by the state’s insurance (Medicaid) and a cash subsidy to help pay the premium for coverage by an employer-sponsored or private health insurance plan. This choice feature is one of the main reasons why insurance companies and employer groups have always supported FamilyCare.

Medicaid eligibility and rates

Like last year, the Governor’s budget proposal would hold the line on Medicaid eligibility and basic provider rates. That means that he proposes to cover all the groups the state already covers, taking nobody off insurance in order to balance the budget. And he proposes to pay the providers of health care services (hospitals, doctors, clinics, etc.) no less than he paid them last year in terms of across-the-board rates. Most other states are making deep cuts in one or both of these areas to address their budget shortfalls.

Governor Blagojevich places a high priority on health care, and his budget positions on base Medicaid and FamilyCare are substantial proof that this priority is very real. Even after factoring in the cuts summarized below, the appropriations for Medicaid and KidCare/FamilyCare will total about $500 million more next year than they did this year. Only a tiny portion of the increase is attributable to the FamilyCare implementation. Overwhelmingly that money is what is needed just to hold the line; that is, to deal with expanded enrollment among population groups that were already eligible and to account for medical inflation. The inflation in the Illinois Medicaid program is below the average of other states’ Medicaid programs, and it is no more than half of health care inflation in the larger economy.

Targeted cuts

The Governor did propose about $400 million in targeted cuts to several features of the Medicaid program. Among these proposed cuts are elimination of coverage of over-the-counter drugs (e.g., laxatives, antiallergy medications) (about $110 million); imposition of a “prior approval” requirement for all prescriptions for brand-name drugs beyond the first three in any month ($27 million); capture of savings from implementation of the federal Medicare drug benefit among people also eligible for Medicaid ($97 million); a nursing home billing change ($30 million); and a hospital rate reduction for “outlier” payments ($40 million).

Medical purchasing

The Governor also proposes to rename the Department of Public Aid as the Department of Healthcare and Family Services (DHFS). One of the new tasks he would give to the department is to oversee the overall health purchasing activities of state government, on behalf of all the health programs for state employees as well as Medicaid. The point is to use this purchasing expertise and power to achieve significant savings.

Next steps

The governor’s proposed budget will be the subject of hearings in Senate and House appropriations and revenue committees. As the session moves toward the scheduled adjournment in late May, the leaders of both houses will negotiate with the governor over the final budget. Competing proposals may emerge, and much depends upon the revenue strategies that support the spending plan. Those who support or oppose parts of the proposal should communicate that position to their representatives and senators.

For more information contact John Bouman at 312.263.3830 ext. 250.