Today, the House approved the Senate version to HB 629 by a vote of 283-32. An amendment approved by the Senate last week used this bill as the vehicle to provide $33.2 million in emergency funding for the Department of Health and Human Services.

Representative Dick Hinch (R-Merrimack) issued the following statement:

“This is an unfortunate but necessary use of the surplus funds. For a number of reasons, including missed projections for reductions in standard Medicaid caseloads, and lack of information on provider rates, this budget gap appeared, and we had to act. The legislature never likes to be the position of having to rescue agencies or programs, but it’s our responsibility to make sure the operation of government and services like Medicaid are able to continue without significant disruption.”

Background: The Senate amended the House-passed portion of the bill to deal with an anticipated deficit of $66.5 million almost entirely in the Medicaid managed care program at the Department of Health and Human Services.  To deal with this, the department is reducing its expenditures and finding additional drug rebate revenue in the amount of $34.2 million. The Senate amendment adds an appropriation of $33.2 million to the Department. Together, this should cover the total HHS anticipated deficit. The additional appropriation will come from the 2017 surplus, with the “rainy day fund” expected to remain at $100 million.

This is not a new or unexpected problem.  It has been known for at least 18 months.  House Finance recognized it and included $36.5 million in its recent budget proposal to deal with the issue.

The shortfall arose in the spring of 2015 when the legislature was dealing with the Medicaid managed care portion of the current FY 16/17 budget.  Two budget assumptions proved incorrect:

  • With an expanding economy, the budget assumed the Medicaid managed care caseload would drop 2% in both FY 16 and FY 17.  In fact, it didn’t drop in FY 16 but dropped 3% in FY 17 (to date).  As a result, HHS lacked sufficient appropriations to cover the additional cost.
  • The “per member per month” cost for each person on Medicaid managed care is determined annually by actuaries.  For FY 16, there was some confusion on when the actuary’s estimate was available, and the number that went into the budget was lower than the actuary’s final number.  For FY 17, only a legislative estimate is possible, and ours, based as it was on the too-low FY 16 estimate, was again too low.  

It was expected that HB 629 would be taken up at the June 1st House session.  However, the Department last week informed the Speaker that such timing would not allow it to make its June 1st payment of $45 million to managed care organizations in a timely manner and asked that the matter be acted upon sooner.  After confirming the Department’s financial situation, the Speaker agreed and scheduled Thursday’s House session.