A Look at State Health Funding in Proposed 2010-11 Budget

Governor Ed Rendell unveiled his proposed state budget for the 2010-11 Fiscal Year on Tuesday. While most departments will sustain General Fund cuts, a few areas, including health care, would see modest increases.

The bulk of the increased health care funding will address the growing
enrollment in Medical Assistance (Pennsylvania's Medicaid program). More people are losing their health insurance as the recession continues to take its toll on Pennsylvania families, and as a result, more people are turning to public health programs. Between December 2007 and December 2009, Medical Assistance enrollment grew by 12%, while enrollment in the Children's Health Insurance Program was up by nearly 19%.

Medical Assistance

The Governor is proposing to increase funding for Medical Assistance by $355 million - from $4.6 billion to $5 billion in 2010-11. That figure includes $1.8 billion in funding from the American Recovery and Reinvestment Act (ARRA). Congress still must act to approve about $850 million of that funding for Pennsylvania, which is part of President Obama's federal budget plan.

Enrollment in Medical Assistance is expected to increase by 3% to 2.13 million individuals in 2010-11.

A few other details on Medical Assistance from the Governor's proposal:

• Funding for outpatient services would be reduced by $72 million in General Fund dollars to $365 million.
• Funding for inpatient and capitation programs would increase by $20 million and $363 million, respectively.
• A number of hospital supplemental payments would be reduced from 2009-10 budgeted levels.
• Managed care payment rates would increase - 4% for physical health and 3% for behavioral health.
• MCO pay-for-performance incentives would be restored to 2008-09 levels.

CHIP

Governor Rendell is proposing to increase funding for the Children’s Health Insurance Program (CHIP) by $3 million in state General Funds, from $97 million to $100 million. Total spending, including federal SCHIP funds, would increase by $20 million to $401 million.

CHIP provides subsidized health insurance for children in families earning up to 300% of the federal poverty level. The Governor's budget would allow the state to serve a total of 208,555 children, an increase of 10,300 children, in 2010-11.

adultBasic

Funding for adult health insurance does not fare as well under the budget proposal.

adultBasic, which provides basic healthcare to Pennsylvanians between ages 19 and 65 who have no health insurance and who meet certain eligibility requirements, receives funding from two main sources, Tobacco Settlement Funds and negotiated contributions from the state’s four Blue Cross/Blue Shield plans. The latter contributions, known as Community Reinvestment funds, are due to expire in December 2010.

Together, Tobacco Settlement and Community Reinvestment funds are budgeted at $199 million in 2010-11 to enroll 50,000 participants. The budget would increase Community Reinvestment funds from $125 million in 2009-10 to $183 million in 2010-11, and reduce Tobacco Settlement funds from $38 million in the current year to $16 million in 2010-11. The budget also assumes premium increases of 80% for individuals purchasing adultBasic at cost, and cost-sharing for current enrollees, would continue.

The share of Tobacco Settlement dollars allocated to adult health insurance has declined through the years, from a high of $112 million in 2003-04 to just $16 million in 2010-11.  Some of the funds have been redirected to the Medical Assistance for Workers with Disabilities Program (MAWD), which currently enrolls an additional 40,000 people.  State MAWD funds are eligible to draw down federal Medical funds, which adultBasic is not, partly accounting for the shift.

You can read more about the proposed state budget in this analysis from the Pennsylvania Budget and Policy Center.