Estimated $1.9 billion cost includes $120 million from general revenue
Medicaid expansion will add $1.9 billion to the state budget in the coming fiscal year, with most of it paid for with federal funds and the rest from anticipated savings from a cut in state costs for the current program.
The budget Gov. Mike Parson delivered to lawmakers on Jan. 27 anticipates that approximately 275,000 low-income adults will enroll for medical coverage. Missouri voters in August approved expanding Medicaid to everyone in households with incomes at or below 133 percent of the federal poverty guideline.
The breakdown of costs, according to Parson’s budget, is $1.65 billion from federal funds, about $130 million from the state general revenue fund and the rest from a variety of sources, including taxes on medical providers.
About $100 million of the expense will come out of current Medicaid spending because the federal government will pick up a bigger share of the current program, said the governor’s budget director, Dan Haug.
In his State of the State Address, Parson said he was including Medicaid expansion, which he opposed, because it is required by the constitution.
“However, it is important to remember that the costs of this expansion will be significant – hundreds of millions of dollars, in fact,” Parson said in his speech.
“This will have a major impact on other areas of our budget, and we must plan accordingly … which means staying vigilant in maintaining the program’s integrity by protecting against fraud and waste.”
Paying for expansion, however, will not require Parson to cut any other item in the state budget, Haug said.
For this budget, it has not caused some of those crowding-out issues,” Haug said. “My concern is going forward.”
Instead, state revenue and cash balances are so strong that it is likely he will lift remaining restrictions on spending this year and have $100 million to pay for one-time maintenance needs on state buildings.
Overall, Parson is proposing a $34.1 billion operating budget. That is down about $1.1 billion from the current year, with the decrease caused by the end of federal support for addressing the COVID-19 pandemic.
Parson is asking for a $583 million increase in spending from the general revenue fund, which will begin the year with a healthy $1.1 billion surplus. That will allow the state to fully fund the school foundation formula, which had $123.4 million withheld in the current year that has not been released.
The state is in much better shape than many other states, Haug said. By substituting federal CARES Act funds in payrolls, he said, the state saved $160 million for the general revenue fund and $70 to $80 million in highway funds.
When the COVID-19 pandemic hit and unemployment soared, Parson said the state was facing an “unprecedented” decline in state revenue.
While the budget proposal anticipates an ending balance of just $36 million on July 1, 2022, that includes setting aside $200 million for supplemental spending needs and $100 million for a reserve fund.
The reserve fund is important for future financial stability, Parson said in his speech.
“Given the financial challenges of the past year, I hope the legislature understands how critically important a cash operating expense fund is for the future of our state,” he said.
While it is certain that the federal government will pay a bigger share of Missouri’s Medicaid costs, it is less certain that all states will continue to pay a smaller share because of the COVID-19 pandemic.
That extra 6.2 percent is likely to continue to the end of this year, Norris Cochran, Acting Assistant Secretary for Financial Resources in the Department of Health and Senior Services, wrote to governors in a Jan. 22 letter.
That is worth about $180 million every three months for Missouri. It is likely but not certain, Haug added, and the guidance came too late to be included in the proposed budget.
Rudy Keller covers the state budget, energy and the legislature for Missouri Independent, a reporting partner of The St. Louis American. https://missouriindependent.com/2021/01/27/gov-parsons-budget-funds-missouri-medicaid-expansion-without-cuts-to-other-needs/