CHARLESTON, W.Va. — Last year, as state leaders fought over a multi-million dollar state budget hole, Gov. Jim Justice activated an emergency lantern in the Capitol dome to signify his worry about what would happen if cuts were applied to the Department of Health and Human Resources.
Now the Justice administration proposes using $60 million in funding that had been set aside for Medicaid costs to close the current fiscal gap.
And the administration proposes using another $103 million in Medicaid money to close a general revenue gap anticipated for the coming fiscal year.
Some lawmakers wonder how West Virginia’s healthcare funds went from emergency to excess.
“A year later you’re telling us there are $163 million in excess funds in Medicaid,” Delegate Isaac Sponaugle, D-Pendleton, said in a Monday afternoon budget hearing for the Department of Health and Human Resources.
“My question is, when did the executive become aware of the $163 million in Medicaid?”
His Democratic colleague on the committee, Mick Bates of Raleigh County, also spoke incredulously about the turnaround.
“Less than six months ago, we sat down to try to figure out a hole,” Bates said during the committee meeting.
“Now six months later we find we have $163 million in funds that have been sitting on the sidelines that are available for us to use.”
Officials with the Justice administration have said the Medicaid money is available as a result of putting aside the money believed to be necessary and winding up pleasantly surprised.
Explanations of where the money came from
“The stars aligned, if you will,” Jeremiah Samples, deputy director of DHHR, told House Finance members.
DHHR started to see improvement with its budget picture during last year’s legislative session, he said.
“Every time we would rebase our actuals versus projections,” Samples said, “things were getting more and more positive.”
He credited steps that had been taken over a period of years to try to avoid budget catastrophes — as well as a couple of strokes of recent good luck.
“All of this happening over the course of a number of years,” Samples said. “These are policy changes that we worked with the Legislature to make to really change the trajectory of the Medicaid spend.”
He added, “Some have been serendipitous but also some very difficult policy decisions we’ve made in conjunction with the Legislature.”
One piece of what has happened, the Justice administration has said, is a federal reimbursement calculation — Federal Medical Assistance Percentages, or FMAP.
Because West Virginia’s economy has performed so poorly in recent years, the amount West Virginia has to produce in Medicaid matching funds has been lowered.
There’s a lag in the calculation, and as the state economy improves the rate will likely go back up.
Another aspect of the money’s availability has to do with loosening up some savings the agency was putting aside.
Samples said DHHR had been building up some reserves in anticipation of a ruling in a lawsuit over cuts to the Medicaid Intellectual/Developmental Disabilities waiver program.
“We had been calculating as if we were going to lose the developmentally disabled lawsuit, he said. “That would have blown a $40 million, $50 million hole in Medicaid budget.”
More recently, he said, the agency began to believe there is a better chance of prevailing in the case, giving the agency confidence to put less aside.
Bates wasn’t convinced.
“I appreciate the excellent management that’s gone on that’s produced these savings,” he said.
“There’s very little that I see to indicate we are healthier. I just pause a little bit here that we’re making the decision to take $163 million off the healthcare table and direct it toward other areas.”
More questions
Lawmakers questioned the wisdom of moving millions of dollars out of DHHR when West Virginia faces such daunting healthcare problems.
Sponaugle asked about cuts two years ago to intellectual/developmental disabilities waivers — the ones that prompted the class action lawsuit.
“How much of that is in the $163 million?” Sponaugle asked.
$40 million was the answer.
Sponaugle then wanted to know about the waiting list for those who hope to use the waivers.
It’s a 1,500-day list.
And 1,300 are on it.
Delegate Ricky Moye, D-Raleigh, questioned whether it’s smart to assume the money is available, considering the lawsuit.
“Is it prudent to go ahead and plan on spending $40 million or moving the $40 million when you haven’t had the final ruling on that?” Moye asked.
“There are risks involved,” Samples said. “If the ruling does not come back favorably, we’ll likely have to come back to the Legislature for a supplemental.”
Priorities
The Justice administration not only wants to close the current fiscal gap, it also proposes additional spending priorities as well as a significant tax cut.
The governor has proposed an additional $35 million for the state Commerce Department to promote development, and he would like to nearly triple the budget for the state Division of Tourism to $20 million.
Justice also proposed an average 1 percent payraise for state employees — which public school teachers and also some legislators are saying is not enough.
And the governor wants to phase out property taxes for industrial manufacturers at a rate of about $20 million a year over the next seven years.
During a House Finance meeting last week that focused on the requests for Commerce and Tourism, Delegate Cindy Frich questioned the priorities.
“I don’t know how much branding is going to help this state. But I do know the opioid epidemic is more than an image. It’s a reality,” said Frich, R-Monongalia.
On Monday, Samples told the Finance Committee that the jobs resulting from investments in Commerce and Tourism would lighten the load on DHHR over time.
“The commerce piece in particular, we believe the generation of additional jobs is really tackling the long-term issues we have — the less the problem will be 5, 10 years from now,” Samples said.
Ongoing debate
In a brief interview in the hallway after the meeting, Delegate Joe Ellington said he would like to see DHHR reinvest its money into healthcare for West Virginians.
Ellington, R-Mercer, is an obstetrician-gynecologist in Princeton. Besides being a member of House Finance, he’s also chairman of the House’s Health Committee.
“There’s money that’s going out of DHHR to be used by the governor for other purposes. We just have so many problems in DHHR that still need to be fixed — salaries for nurses, CPS workers and social workers who need changes in pay scale.
“Providers are getting nicked every year. Those monies should probably stay within DHHR and try to fix the problems we have or at least correct that.”
Ellington said he is sympathetic to the notion of investing more in Commerce and Tourism, but thinks the money should be found elsewhere.
“I see that. But that’s where we have to look at other revenues coming in too. We still have the problems with DHHR,” he said. “Before those monies are leaving, I think we should take care of our own problems first.”
Discussion about DHHR and its budget continued after the meeting in offices occupied by Democratic delegates. Brent Boggs, the ranking minority member of finance, was chatting with other delegates, including Sponaugle and Bates.
Boggs has questioned since the governor’s State of the State address how Medicaid money had been identified to fill general fund budget gaps.
Even after hearing Monday’s explanation, he said he remained puzzled.
“Every answer that was given just generated more questions,” said Boggs, D-Braxton.
Foremost in Boggs’ mind was what if the situation changes. If the state’s reimbursement rate from DHHR should change again, for example, then West Virginia could find itself back in a budgetary jam.
“This is a calm spot, I believe, in what could be a rocky road a few years out.”