Shriver Center: January 2005

Medicaid, the State Budget, and Federal Funds

2006-07-13T16:23:45Z

There is much attention paid to Medicaid these days, because it is a large item in the stressed state budget, and because some observers think the Bush Administration is considering scaling back the federal financial role in the program. Medicaid provides health insurance for about 1.7 million Illinois residents, including children (a million), working parents, elderly, and people with disabilities. While under a quarter of the people served by the program are elderly or disabled, over 70% of the program's funds go to meet their higher medical needs.

The program is tremendously important to Illinois. Governor Blagojevich considers it a core priority of his administration, and the health care needs of Illinois residents consistently score highly in polling about what people expect from state government. Decisions that will affect its continued vitality and effectiveness must be based on good information and an accurate understanding of the issues related to its funding. While there are many aspects of Medicaid, the following three issues related to its funding need to be better understood.

1. Medicaid in Illinois is not "out of control."

Illinois spends a significant amount of money on Medicaid (and the closely related KidCare and FamilyCare programs), and the gross amount (about $10 billion across several state agencies) has been rising substantially in the past several years. It is easy to cite this one fact and cry that the program is "out of control." For example, this assertion was a taken-for-granted primary premise for the hearings on managed care convened by the General Assembly in the second half of 2004. But that is a mistaken premise.

Far from out of control, the increases in spending have been driven by conscious decisions to offer health insurance to more people who need it, and by the high medical inflation that prevails in the larger economy. Illinois actually has managed this inflation well, so that the inflation in the Medicaid program is about half as large as medical inflation generally. The growth of Illinois spending on Medicaid is substantially lower than the national average of state Medicaid spending. And, most importantly, Illinois spending of state-source funds on Medicaid has been moderate and well-controlled. State-source spending on Medicaid is about the same percentage of general revenue spending as it was in the mid-1990s, about 10%.

Just because Illinois spends "a lot" on Medicaid does not mean Illinois spends "too much," nor even that Illinois spends "enough." It is too simplistic to just look at bottom line gross spending when trying to make a responsible judgment about whether the spending is appropriate or not. Specialists in almost every field funded by Medicaid make compelling cases that the program is actually underfunded.

There are 2 million uninsured in Illinois, and the number is rising (including many thousands actually eligible for Medicaid but not enrolled). Many people covered by Medicaid, especially children, have extreme difficulty accessing health services. Studies have shown that payments pediatricians receive from Medicaid are less than half of what they are paid by Medicare for the same primary care services (which in turn is less than what private market insurers pay). Hospitals are reimbursed at substantially less than their cost. Nursing homes around the state are in danger of having to close due to financial difficulties. There is a large unmet need for community-based services for the elderly and disabled. Only in the largest area of medical inflation – prescription drugs – is there no compelling case for underfunding. But there is no compelling case for overspending on prescription drugs, either. Illinois has made tremendous progress in the last few years in controlling drug costs through administrative improvements, harder bargaining with manufacturers and better targeting of services. However, it is important to remember that appropriate drugs are the most effective way to avoid even higher costs of hospitalization or institutionalization, while improving patients' quality of life. Increases in this area of spending are desirable when they serve these functions.

In a program the size of Medicaid there will always be ways to improve service while also introducing economies and efficiencies that save money. That should always be a priority. But that does not mean the program is out of control. It has grown mostly because Illinois has decided, carefully and consciously, that it is an important role for state government to provide health insurance to almost 2 million residents. It costs money, but we knew that when the decisions were made. To spend substantially less will mean fewer people covered and less access to actual health care for those who retain coverage.

2. Federal Medicaid funds are a key to the whole Illinois general funds budget.

Illinois receives 50% federal matching funds for all of its expenditures on Medicaid, and 65% for its expenditures on KidCare and FamilyCare. If Illinois spends more because of more people getting insurance or higher utilization of services or inflation in the cost of services, the federal government comes along with open-ended matching funds at these percentages. The burden of meeting higher costs over time is shared. Under this open-ended matching scheme, Illinois now receives about $5 billion in federal funds every year, which is placed in the General Revenue Fund (GRF) and forms a very large part of the $23 billion total in that fund.

As the Bush Administration and Congress begin to consider the Medicaid program, it is important to understand the impact on Illinois of any substantial decrease in federal Medicaid funds. A cut in federal funds could come from a straight funding reduction, and/or it could come as a result of moving the funding mechanism away from the current matching system. Changing to a fixed amount of federal funding (either a "cap" or a "block grant") would result in decreased funding for Illinois because the whole burden of program growth would shift to Illinois. Without matching federal funds, any increase in the covered population (through program expansions to reach more uninsured, or through demographics such as the aging of baby boomers), in health care utilization, or in medical inflation would have to be funded with state funds alone or offset by program cuts.

If Illinois loses substantial federal funding for Medicaid, it will of course threaten the services provided by Medicaid itself. But policymakers also have to understand that this would be first and foremost a strong hit on the whole general funds budget in Illinois. Illinois puts its federal matching funds into the GRF. A substantial reduction in federal Medicaid funding would be no different, in terms of the Illinois GRF, than, for example, a comparably-sized cut in the sales tax. All programs funded by the GRF, therefore, would be threatened – K-12 education, higher education, corrections and public safety, child care, and so on. For example, funds that may have previously been available for K-12 education might be diverted to meet the newly heightened need for state funds to address compelling needs for long term care, hospital care, home care, or immunizations (previously met with federal funds).

Every group that has an interest in a program funded by the Illinois GRF must be aware that their interest is threatened by a federal pullback from Medicaid funding. The Illinois congressional delegation needs to understand this, too.

3. Substantial reductions in federal health care spending would hurt the economy.

While health care spending is a difficult task for governments at all levels to sustain, there is a significant flip side of economic benefits that flow from this investment. That is the conclusion of a recent study of six metropolitan areas in diverse parts of the country done for the Brookings Institution. Daniel Gitterman, Joanne Spetz, Matthew Fellowes, "The Other Side of the Ledger: Federal Health Spending in Metropolitan Economies," Brookings Institution (September 2004).

The study examined the impact of federal expenditures for Medicare and Medicaid and other health care programs on the economies of Atlanta, Milwaukee, Oakland, Philadelphia, San Antonio and San Diego. Among the findings:

Direct federal health spending ranged between $2.3 and $10.2 billion annually depending on the city (Philadelphia, comparable to Chicago, was the highest). It was an average of 4.4% of the metropolitan gross product (Philadelphia was close to 6%). This spending generates many more billions of economic impact for local economies through multiplier effects.
Health service jobs numbered over 11.9 million nationally, and were between 6.6 and 12% of the jobs in the cities studied. Between 1993 and 2002, jobs in the major health employer groups grew at an average rate of 20% in the studied cities. About 16% of all new jobs created between 2002 and 2012 are expected to be health services jobs.
Health service jobs are better-paying than average jobs and do very well in comparison to service sector jobs.

Health care spending is worth it for the health care access that it produces. But, as this study demonstrates, it also produces much more than that. The coming federal health care debate needs to be a high priority for Chicago and other localities around the state, and for the state policymakers as well. The stakes involve much more than just health care or the state budget. They threaten a key beneficial sector of the state and local economies and labor markets.

Discouraged TANF Applicants: Eligibility in the Brooks Case

2006-07-13T16:23:45Z

The Shriver Center’s welfare advocacy attorneys have been working for years to challenge the Illinois Department of Human Services’ (the Department) illegal practice of whittling away at its welfare caseload by misleading people in need of public assistance into believing that they are ineligible for benefits. Thus many eligible people either do not apply for assistance or abandon their applications. This policy is exemplified in the recent cases of Latisha and Jasmine Brooks, two cousins originally from Bloomington, Illinois, in which the Shriver Center was able to successfully challenge this illegal practice.

Latisha Brooks was seven months pregnant and living in a shelter for battered women and their children when she was referred to the Shriver Center for help with her public assistance application. The Center learned that although she was fully eligible to receive Temporary Assistance for Needy Families (TANF) cash assistance, Latisha Brooks was only receiving Food Stamps and Medicaid. When asked why she wasn’t receiving TANF, Ms. Brooks had this to say: “In Bloomington you have to be on bed rest to get cash.” That is what Latisha Brooks was told in the McLean County Office that serves Bloomington, discouraging her from even applying for TANF. It is not correct Department policy – there is no such limitation on eligibility for TANF, and Latisha Brooks was in fact eligible for assistance.

Unfortunately, Latisha Brooks wasn’t the only person in Bloomington who was misled about her eligibility for TANF cash assistance; her cousin Jasmine Brooks was told the same thing by a caseworker in the McLean County local office of the Department when she too tried to apply for TANF after becoming pregnant.

People like the Brooks cousins who are misled about their eligibility or discouraged from applying for benefits at all often believe that there is nothing to be done after the fact. That is not the case, however, because the appeals system is designed to rectify all kinds of errors after the fact. The Shriver Center filed an appeal on behalf of Latisha and Jasmine Brooks and sought benefits dating back to the Brooks cousins’ first attempts to apply for TANF. The Department settled Latisha Brooks’s case, which by then had been transferred to the Western Local Office in Chicago. Jasmine Brooks’s case remained with the McLean County Local Office, which refused to settle the case and issue her the back benefits to which she was entitled. After a fair hearing, the administrative hearing officer found that Jasmine Brooks had been misled and wrongly denied the opportunity to apply for benefits for which she was eligible. The Department paid Jasmine Brooks back benefits.

The story of Latisha and Jasmine Brooks is not unique. It is consistent with many stories the Shriver Center has heard over recent years from clients and from organizations that work directly with large numbers of clients who attempt to access the TANF program when they are in need. Top officials in the Illinois Department of Human Services agree that this practice should not be happening and that Department policy should be followed in all cases. The Department and the Shriver Center are currently working together to assemble data to determine the scope of the problem, and they are hoping to use those figures to design a way to eliminate the practice of diverting eligible clients from receiving the benefits that they need to survive.

The Shriver Center wants to know if you or anyone you know was not allowed to apply or diverted from applying for benefits despite financial and categorical eligibility. Please contact Aleeza Strubel at (312) 263-3830 ext. 229 , for more information or to report new cases.

Final Step of FamilyCare Implementation Will Help Workers

2006-07-13T16:23:45Z

FamilyCare, one of the signature achievements of Governor Blagojevich’s administration, provides health insurance for parents of minor children who are already covered under Medicaid or KidCare. Governor Blagojevich has moved forward with his promised implementation of FamilyCare over a three year period, starting in 2003 and coming to a head in the first months of 2005.

The federal government has promised very favorable 65% matching funds to pay for most of the costs of expanding Family Care all the way to 185% of the federal poverty level. For the first two years of his plan during state fiscal years 2004 and 2005, the Governor pushed an expansion of the program from 49% to 90% of the poverty level and then up to 133%, making 77,000 more families eligible for health insurance at each increase.

Features of the final step of FamilyCare implementation

The third and final year of the Governor’s implementation plan is scheduled to be announced in his budget message in February 2005 for state fiscal year 2006. The final step of FamilyCare implementation will increase eligibility from 133% of the poverty level to 185%, a household income of $34,044 for a family of four, effective July 1, 2005. Another 77,000 families would be offered health insurance. This moves eligibility well into the ranks of low income workers, those who struggle to meet their living expenses and afford health insurance even when their employers offer it.

This final step also includes the “premium assistance option”. Under this option, the working parent can choose to be covered either by the state’s insurance (basically the same as Medicaid), or to accept a monthly cash amount per family member, probably about $75, to partially subsidize the premium for private insurance or employer-sponsored insurance. This choice is free and can be reversed back to state health insurance. Generally speaking, the state’s insurance will usually offer fuller coverage and lower expenses, but the private or employer-based insurance will offer better access to a variety of doctors. The parents will be able to choose which is more important to them.

Employers should benefit as well from the premium assistance option. The cost of employer-sponsored insurance has been going up, and as a result more and more employees are declining the coverage, especially those who are basically healthy. As a result, the employees left in the employer’s insurance pool are less healthy, so the employer’s premiums increase even faster. The FamilyCare premium assistance should help to keep more of the healthier employees in the employer-sponsored plans, thus helping to control the premiums for all of the employees covered by the plan.

Why FamilyCare makes sense

Governor Blagojevich is to be commended for holding steadfast to his FamilyCare promise, in spite of the difficult state budget. He understands all of the reasons why FamilyCare makes sense. These reasons include:

Children benefit -- they are more likely to be insured and more likely to use primary health care when their parents are insured.
Illinois gets unusually high 65% federal matching funds for FamilyCare.
The federal funds come from a “use it or lose it” annual allotment earmarked for Illinois but taken away if we do not use it. FamilyCare keeps this federal money in Illinois.
FamilyCare helps working parents access primary and preventive health care, which keeps parents healthy, productive, and employed. It also helps families avoid the stress of debt and bankruptcy from medical bills.
FamilyCare completes welfare reform – without it, low income working families with health care needs are punished for working by losing their health insurance coverage.
Employers benefit because workers are more productive. Also, the premium assistance option helps employees afford to stay in employer plans. When these on-average healthier employees participate in health plans, those plans have better actuarial performance and this helps control premium increases for all employees.
FamilyCare is a net gain for health care providers because it decreases the uncompensated care burden.
This is an ideal positive initiative for the budget: smart leverage of federal dollars (which we otherwise lose), help for workers and employers, help for children and families, and help for the stressed medical system.

House, Senate Pass Different Versions of Rental Housing Support Program

2006-07-13T16:23:45Z

Low-income housing advocates scored victories in the Illinois General Assembly’s Veto Session when the Rental Housing Support program passed in both the House and Senate. But, since the two houses passed slightly different versions of the legislation, advocates will regroup to pass this legislation through both chambers during the 2005 regular session.

The Rental Housing Support program is a key initiative of “It Takes a Home to Raise a Child,” a multi-year campaign led by the Chicago Coalition for the Homeless to prevent and reduce family homelessness. The Rental Housing Support program – backed by the Shriver Center, the City of Chicago, the Illinois Association of Realtors, and over 150 other organizations statewide – would create a state-funded rental assistance program that would subsidize the rent for thousands of families who earn less than thirty percent of area median income (around $19,000 for a typical family of four in Illinois). The program would be funded by a small state surcharge ($10 or $11) on real estate documents recorded with county recorders. Advocates expect this surcharge to subsidize over 5,500 families annually throughout Illinois.

The Rental Housing Support program was originally introduced in the 2004 spring legislative session as House Bill 4100 but stalled in the House Rules Committee despite its numerous legislative co-sponsors and organizational supporters. The program resurfaced as SB 520 for the fall veto session, passing the House with strong bipartisan support (73-42) on November 9. The Senate immediately considered parallel legislation (HB 626). But during its Executive Committee hearing, some Senate Republicans expressed concerns about the scope and implementation of HB 626’s $11 document-recording surcharge. Accordingly, advocates and their legislative allies decided not to call the bill for a full Senate vote immediately, and instead amended the bill to ease some legislators’ concerns, including a decrease in the total surcharge to $10. The amended version of HB 626 passed the Senate 33-22-1 on January 10, 2005, during a special two-day final session of the 93rd General Assembly. Unfortunately, the amended bill was not called for a concurrence vote in the House before the session ended.

Though it was not successfully enacted, the Rental Housing Support program has now proven its strong support in both the Illinois House and Senate, and advocates are hopeful that it will pass during the 2005 legislative session. Advocates ask that constituents call their state legislators to urge their support of the Rental Housing Support program when it returns.

For more information on the Rental Housing Support program, please see http://www.ittakesahome.org/, or call Raj Nayak at 312-263-3830 ext. 243.

S.B. 3007 Will Shield Some Past Convictions from Potential Employers

2006-07-13T16:23:45Z

Legislation aimed at helping Illinois residents put criminal records behind them and obtain employment passed in the General Assembly in the November veto session and is awaiting action by Governor Blagojevich. That legislation, Senate Bill 3007, would expand the types of convictions that people could have “sealed” from public view and therefore not visible to potential employers.

The bill would add prostitution and Class IV (the lowest level) felony drug possession convictions to the current list of convictions that could be sealed. Under legislation passed in 2003 and in effect since January 1, 2004, individuals may petition to have most records of non-violent ordinance violations and misdemeanors sealed. Under both existing law and the new bill, people who wish to seal criminal records have to wait three or four years after completing their sentence and not have any additional convictions. Under the pending legislation, people with felony drug convictions would have to file drug test results showing that they are drug free with their sealing petition.

The bill passed the Illinois Senate on November 10th. It passed the House in the spring 2004 General Assembly session, with several amendments from concerned parties and law enforcement agencies. Now, as the bill awaits action by the governor, the press is urging an amendatory veto. Supporters of the bill are asking Governor Blagojevich to sign it into law in its present form. Those with concerns could propose changes in the spring 2005 General Assembly session.

Advocacy efforts in support of the bill were lead by the Developing Justice Coalition. For more information, contact Shriver Center attorney Margaret Stapleton at 312.368.3327.

News from the Shriver Center's Community Investment Unit

2006-07-13T16:23:45Z

Funding and partnership opportunities for nonprofits and banks to offer financial education in Southern Illinois

Nonprofit organizations interested in offering financial education classes for low-income adults in southern Illinois are invited to attend a free, one-day bidders’ conference in Salem, Illinois. The conference will be held Tuesday, February 1, from 9am-4pm at the University of Illinois Extension Marion County Office at 1404 E Main, Route 50 East in Salem. Continental breakfast and lunch will be provided. A Request for Proposals will be issued at the conference to fund up to five nonprofits in southern Illinois at approximately $8,000 to $10,000 per site. Only nonprofits that attend the conference will be eligible to apply for the grants.

Participants will learn about the Financial Links for Low-Income People (FLLIP) coalition’s Financial Education Program (FEP), how to write a strong proposal to receive FLLIP FEP funding, and how to form partnerships to teach financial education to low-income adults. Participants will also learn how to write persuasive proposals for support from private financial institutions and others from an experienced grant writer and foundation consultant.

Union Planters Bank will host a related luncheon for banks and credit unions interested in learning about the FLLIP Financial Education Program on Wednesday, February 2, from 11:30am-1:00pm., at the Kokopelli Golf Course at 1401 Champions Drive in Marion. Luncheon participants will learn how to attract knowledgeable customers and new business by supporting free financial education classes for low-income adults. The financial institutions will be encouraged to partner with local nonprofits to develop strong proposals and implement effective programs.

The bidder’s conference and luncheon are sponsored by the Sargent Shriver National Center on Poverty Law, whose community investment unit coordinates FLLIP, a statewide coalition of advocates, educators, nonprofits, government agencies, and financial institutions dedicated to expanding financial education, asset-building opportunities, and access to mainstream financial services in Illinois. For more information about the Shriver Center and its community investment unit, please visit their Web site at http://www.povertylaw.org/advocacy/community_investment/index.cfm.

If you are interested in attending either the bidders’ conference or the bankers’ luncheon, please contact Yuri Gottesman at 312.368.1033 by January 28, 2005.

Three Central Illinois Nonprofits Receive FLLIP Financial Education Grants

Congratulations to Partnership Accounts for Individual Development (PAID nfp) in Champaign, the University of Illinois Extension of Peoria County, and the Christian Family Center Corporation in Peoria, for receiving grants to serve as Financial Links for Low-Income People (FLLIP) Financial Education Program (FEP) sites. In partnership with local financial institutions, these nonprofits submitted strong proposals to provide free financial education classes to low-income adults in central Illinois.

The financial education program, which is coordinated by the Shriver Center, is comprised of a series of workshops aimed at increasing financial literacy, savings, and assets among low-income adults. The curriculum that the FEP sites use, All My Money and Your Money & Your Life, was developed by the University of Illinois Extension and FLLIP members. It addresses topics such as developing credit, saving and spending, using mainstream financial services, tax issues, immigrant issues, identity theft, and public and employee benefits.

The Grand Victoria Foundation and Illinois Department of Human Services provide major funding for this program.

For more information contact Yuri Gottesman at 312.368.1033

The Need for SEED

More people are going to college; there’s no doubt about that. But what impact does this trend have on issues like asset building, attainment, and sustainability? And more importantly, who are receiving college degrees? Are more low-income people and minorities completing college?

According to the First Quarter 2004 edition of the New England Economic Review, the national gap in college completion between blacks and whites has risen 5.3% from 7.3% in 1970 to 12.6% in 2000 (38). Just because more people are going to college doesn’t mean the distribution of opportunity is getting better. A rise in the disparity between blacks and whites denotes that the same inequalities exist in who is actually completing college.

In the same article, research cited family income as a factor in college attendance not just at the time of intended college entry but also throughout the child’s adolescent life. Cameron and Heckman (2001) argue that “family income has its greatest influence on forming the ability and college readiness of youth, starting in childhood, not in financing a college education” (43).

This reiterates the need for asset building programs such as Individual Development Accounts (IDAs). The Shriver Center’s Chicago SEED (Savings for Entrepreneurship, Education and Downpayment) Program is a primary example. This nationwide initiative establishes matching funds in a child’s savings account that will gain interest throughout adolescence and at age 18 may serve as a “nest egg” upon entering adulthood and hopefully graduating from high school. As the name suggests, the funds may be used for various asset goals (small business startup or the down payment on an asset like a home, for example).

Here at Mayo Elementary School in Chicago,, all the IDA accounts are specifically earmarked for postsecondary education. Both parents and children expressed their enthusiasm for making college savings their asset goal, thus fueling a positive mindset about college attendance at an early age. All SEED participants nationwide come from low-income families, and most if not all of the Chicago participants are African American. With the continuation of SEED and other similar programs, perhaps the next U.S. Census will report a trend toward closing the gap on college completion.

For more information about asset building and SEED contact Nancy Wilson at 312.368.1073.

Financial education instructor training sessions offered

On February 9 and 10, from 9:00am to 4:00pm, the University of Illinois Extension and the Shriver Center will offer instructor training on Your Money and Your Life, part of the FLLIP financial education curriculum. The training sessions will be held at the Shriver Center, located at 50 East Washington, suite 500 in Chicago. Topics covered will include managing debt, avoiding money traps, using financial institutions, choosing insurance, realizing job benefits, making money with money, taking advantage of public benefits, understanding taxes, identity theft, immigrant banking issues, etc. The training cost is $110 per person and includes instruction, instructor manual, materials, handouts, and food (breakfast, lunch, and refreshments).

Contact Hannah Avellone at 312.368.8575 to RSVP or for more information.