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AHCA Warns Medicaid Costs Could Soar By $1 Billion

The Florida Channel
Florida's economic collapse due to the COVID-19 pandemic is expected to cause ballooning Medicaid enrollment.

Florida’s economic collapse due to the COVID-19 pandemic is expected to cause ballooning Medicaid enrollment that might blow a $1 billion hole in the state budget, according to new projections by the agency that oversees the health-care safety net program.

The dramatic rise in costs could exert additional pressure on Gov. Ron DeSantis and the Legislature to cut the budget as businesses shutting down and scaling back have dramatically reduced the main sources of tax dollars used to pay for state spending.

An Agency for Health Care Administration analysis of projected costs and enrollment obtained by The News Service of Florida shows that as many as 437,390 additional people might turn to Medicaid for health care in the coming fiscal year, which starts July 1.

The spike in enrollment could increase overall costs in the coming year by as much as $3 billion. Congress recently approved a 6.2 percentage-point increase in the federal government’s share of Medicaid costs, what is known as the Federal Medicaid Assistance Percentage, or FMAP.

But even with that boost, the extra money wouldn’t cover all of a $3 billion increase next year, and Florida would be on the hook for about $1.07 billion, the analysis shows.

“We will still see additional costs that the state will incur that won't be covered by the enhanced (FMAP), just attributable potentially to increased enrollment,” Agency for Health Care Administration Secretary Mary Mayhew told the News Service.

Also, those projected enrollment numbers and costs are only for next fiscal year. The agency’s analysis anticipates that during the final three months of the current fiscal year --- between April 1 and June 30 --- an additional 109,348 people will enroll and that overall costs could exceed what was budgeted by $186.9 million.

Florida, the analysis shows, would be responsible for about $66.5 million of that amount, while the rest would be picked up by the federal government. But the increases in Medicaid spending in the current fiscal year might not be a problem.

“The real financial pressures,” Mayhew said, “likely will be felt more in fiscal year 2020 (the 2020-2021 year starting July 1).”

Mayhew stressed that the projected Medicaid caseload and cost estimates are a work product of her agency and are not official. Economists who serve on what is known as the state’s Social Services Estimating Conference develop the official estimates that the Legislature and governor rely on for budgeting purposes. Those estimates are based, in part, on data provided by the agency.

In developing its estimates, Mayhew said her agency reviewed how the financial crisis and recession that caused major problems in 2008 and later years affected Medicaid enrollment and costs. AHCA applied those trends to develop projected estimates for the current state fiscal year, as well as the following two fiscal years.

The projections could improve, Mayhew said, if the economy recovers quicker than anticipated. Also, the budget picture for Florida could improve if Congress agrees to an additional increase in the federal share of funding for Medicaid.

“I certainly think that there will be discussions about whether or not it should be increased,” she said of the federal share.

Long-time social services lobbyist Karen Woodall said the projected enrollment figures were on the high side. The trend data AHCA relied on for its assumptions, she said, included a two-year period following passage of the federal Affordable Care Act, when “huge amounts of money” were directed to Medicaid outreach and enrollment, leading to larger enrollment increases than traditionally experienced.

Also, she said that “unless (President Donald) Trump is successful in repealing it,” many people who lose their jobs should qualify for health insurance through federal insurance exchanges that are part of Affordable Care Act. Job loss is a qualifying event that triggers an enrollment opportunity.

Regardless of how high the state’s unemployment rate might soar, Medicaid eligibility requirements in Florida are restrictive. No able-bodied, unemployed, childless adult qualifies for the program, Woodall said.

Medicaid provided health care to about 3.76 million poor, elderly and disabled people in March, according to numbers posted on the AHCA website.

But it is a counter-cyclical program. When the economy sours, enrollment in the program increases, which, in turn, increases costs. Money needed to fund the program, however, also becomes more scarce as a cooling economy translates to less tax collections coming into the state.

In the past when there have been shortfalls in Medicaid, the Legislature has made budget reductions to try to make ends meet.

“Anytime you’re a Medicaid provider, you fear a recession because a recession can often lead to cuts in reimbursement rates,” Safety Net Hospital Alliance of Florida CEO Justin Senior said.

Senior, a former Florida Medicaid director and AHCA secretary, said now might not be the time to make payment cuts to providers, given that the economic downtown was caused by a health-care crisis..

“The traditional well that they (lawmakers) go to, which is to cut health care providers, isn’t necessarily wise, because you have to maintain your health care infrastructure,” he said.

Sen. Aaron Bean, a Fernandina Beach Republican who is in charge of developing the health-care budget in the Senate, agreed with Senior. He acknowledged that the Legislature has in the past four years cut funding to safety-net hospitals that provide large amounts of Medicaid and charity care.

“They have really stepped up, and they are going to be hurting,” Bean said.

Woodall said lawmakers have options and don’t need to resort to Medicaid reductions if the projections are accurate. Woodall said that Florida has an estimated $4 billion in reserves that could be used to help shore up the potential shortfall. Additionally, lawmakers could begin collecting taxes on more goods sold online, a move that has been rejected in the past but Woodall hopes gains momentum in the wake of the COVID-19 crisis.

“I don’t think the sky is falling, honestly,” Woodall said. “It’s just something that we’ll have to deal with. And I think we can.“