CONTACT: Seth Boffeli, (608) 266-1683
Joint Committee on Finance
Testimony of Secretary Dennis G. Smith
Department of Health Services
MADISONToday, Secretary Dennis G. Smith testified before the
Joint Committee on Finance on the Departments 2011-13 biennial budget
proposal. Text of the prepared testimony follows:
"Senator Darling, Representative Vos, and members of the Joint
Committee on Finance, I am pleased to testify before you today. I look
forward to discussing with you the major components of Governor Walker's
biennial budget for the Department of Health Services.
As you know, the Department of Health Services is the largest state
agency in terms of total funding and the second largest in staffing,
behind the Department of Corrections. The Department has 5,574 FTE,
operates seven direct care institutions, and has an annual budget of about
The Medicaid and BadgerCare Plus programs comprise 86% of the
Department's budget. Despite these extremely difficult budget times, the
Department receives a $1.2 billion GPR increase in Governor Walker's
budget for ongoing support of these two programs. The Department as a
whole will see a 23% increase in GPR, and 86% of all new general tax
revenue will go to fund Medicaid.
When Governor Walker took office, he faced a budget deficit of $3.6
billion, of which $1.8 billion was the cost to continue deficit for the
Medicaid program. Rather than relying on budget gimmicks or service cuts,
Governor Walker's budget fully funds Medicaid services while including
measures to control the growth in the program in the coming years.
The Medicaid and BadgerCare Plus programs, including the Family Care
long-term care benefit, have reached a crisis point. Over the past five
years, expenditures have grown 50 percent while general fund tax revenues
have been flat. Monthly enrollment in the program has increased by more
than 25 percent since November 2008, and almost 20 percent of the state's
population and 30 percent of our children are now covered by Medicaid.
The majority of the Medicaid growth over the past two years was
supported by a temporary increase in federal funding for the program.
Under the American Recovery and Reinvestment Act and the Education Jobs
Act, the share of Medicaid costs reimbursed by the federal government
increased between 5 percent and 10 percent between October 2008 and June
2011. While total expenditures increased an average of 12 percent per year
between fiscal years 2008-09 and 2010-11, state funding for the program
increased 1 percent annually. The additional federal funding totaled over
$600 million in fiscal year 2010-11, which will require the state to
replace $1.3 billion of Medicaid expenditures with state funding in the
This growth is not sustainable. As Medicaid spending has grown, funding
for other essential government functions such as public safety, education
and property tax relief, have been squeezed. In the recently enacted Act
10, the Legislature provided the Department with new authority so that
significant, immediate program reforms can be implemented in order to
ensure the program remains viable into the future.
It is estimated that, in the absence of these reforms, the program
would have continued to grow unabated in the next biennium. With the new
authority, the budget projects that the Department can "bend the cost
curve" by $500 million GPR over the next biennium.
Other states have resorted to drastic measures to balance their
Medicaid budgets, such as:
" Arizona has proposed suspending Medicaid coverage for 280,000
" New York State is proposing a 2% across-the-board decrease in
" Georgia has proposed dropping dental and vision coverage.
" California has proposed cutting Medicaid by $1.7 billion in part by
reducing provider payments by 10%.
" Maryland has proposed cutting payments to hospitals by $264 million
- on top of $133 million in hospital cuts over the past three years.
Governor Walker chose a different approach. Instead of eliminating
coverage for thousands of people or slashing benefits or provider
reimbursement rates, the Governor gave the Department the authority to
make reasonable changes to the program to reduce costs, improve care
outcomes and efficiencies, while maintaining essential services
Over the next several weeks, the Department will seek input from
consumers, providers, advocates, and other stakeholders on how to
implement these ideas. In addition, the Legislature has directed the
Legislative Audit Bureau to conduct an audit of Medicaid, and we look
forward to learning from that report as well. In general, we will pursue
Common Sense Changes to Eligibility. The federal Patient Protection and
Affordable Care Act (PPACA) imposes maintenance of effort requirements on
states, essentially freezing state Medicaid eligibility standards and
processes as of March 23, 2010. The Legislature has directed DHS to seek
approval from the federal government to waive certain requirements so that
it can make common sense modifications to eligibility requirements. If the
Obama administration fails to approve such changes, it would force
Wisconsin to eliminate coverage for non-pregnant, non-disabled adults with
family incomes above 133% of the federal poverty level as of July 2012, an
outcome that no one wants.
The changes we will seek may include, among other things, strengthening
standards for state residence, limiting retroactive eligibility, and
requiring young adults to enroll in their parents health plans if eligible
to do so.
Aligning Provider Incentives to Achieve Better Outcomes. The goal of
these initiatives will be to ensure the appropriate care is provided in
the appropriate setting at the appropriate time.
Aligning Coverage with Other Payer's Policies. These include expanded
use of Benchmark coverage and higher cost share requirements to better
reflect coverage that working families receive in the private insurance
Improving Managed Care and Care Coordination. The Department intends to
explore the use of health homes and ways to better coordinate primary,
acute, and long term care services.
Health Care Efficiency Measures. The Department will pursue other
efficiencies, such as aligning Medicaid reimbursement policy with Medicare
and expanding auditing activities.
Changes in Family Care Enrollment. The budget pauses further expansion
in the Family Care program in the coming biennium, both in terms of
enrollment increases in existing counties and expansion into new counties.
The program has grown rapidly in recent years, and the Legislative Audit
Bureau is currently conducting an audit of the program.
SeniorCare. As you know, the Governor's budget includes statutory
changes to leverage Medicare Part D to achieve savings in the SeniorCare
program. SeniorCare participants would be asked to enroll in Part D if
eligible. In these difficult budget times, this proposal provides a way
for the state to maintain coverage for seniors and preserve the SeniorCare
program. SeniorCare will continue to provide valuable coverage for seniors
not eligible for Part D, for prescription drugs not covered by Part D, and
for costs in the Part D "doughnut hole." Even with these
changes, Wisconsin seniors will continue to enjoy the broadest
prescription drug coverage of any state in the nation.
Changes to the Medicaid Eligibility Determination Process. The budget
directs the Department to centralize administration of the income
maintenance system process statewide. This major new initiative is
essential to prepare for the integration of Medicaid eligibility into the
new Health Insurance Exchanges by 2014 and to achieve cost savings through
technology and standardized workflow policies statewide.
To summarize, Governor Walker's proposed budget for the Department of
Health Services preserves essential health services for low income
families, the elderly, and people with disabilities while giving the
Department the tools needed to reduce the rapid growth in health care
costs that we have experienced in recent years. Under Governor Walker's
leadership, I am confident we will ensure these fundamental health care
supports are sustainable in the years to come.
I am happy to take any questions you may have."
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Last Revised: April 06, 2011