Federal judge’s Illinois Medicaid ruling squeezes state government cash flow

Medicaid has ballooned to cover more than a quarter of Illinois’ population, with spending at $5.4 billion, up 141 percent 2015 compared with 2000. Now that a federal judge has ruled Illinois must speed up its Medicaid payments, the state’s Medicaid payment will increase $83 million each month, for a total monthly payment of $376 million.

A federal judge ruled June 30 that the state of Illinois needs to speed up its Medicaid payments. The state owes about $1 billion to local doctors and hospitals, and must now pay an extra $83 million each month just to catch up by the end of the fiscal year. These extra payments are on top of the normal $293 million the state owes each month.

The state’s new $376 million monthly Medicaid payment is problematic on its own, and it’s sure to create even greater cash-flow problems for the state.

The state had been spending at an annual run rate of over $39 billion as a result of court ordered spending and other required payments, including pensions and debt. Even the likely-to-be-approved $36 billion budget will probably not ease Illinois’ cash problem. Moody’s Investors Service agreed that would likely be the case in its recent credit review of Illinois.

The ratings agency commented on the Medicaid ruling, saying it “cast(s) doubt on the state’s immediate ability” to pay for Medicaid, pensions, debt service and school finding.

It’s time for reforms, not tax hikes 

Tax hike proponents will be sure to point to the Medicaid ruling as proof that the state needs more money, and the only way to fix the budget – and now cash-flow – crisis is to enact proposed multibillion-dollar tax hikes.

But the truth is the court ruling confirms the need for dramatic reforms in how the government spends.

Unreformed Medicaid and government-sector compensation have continuously stripped core government services of funding for more than 15 years. Medicaid spending was 141 percent higher in 2015 compared to 2000, up $5.4 billion.

That contrasts sharply with funding for core services, which have stagnated during that same period.

Part of the reason Medicaid costs have grown is the number of Illinoisans enrolled is almost double compared with 2000. Medicaid has ballooned to cover more than a quarter of Illinois’ population.

It’s no longer just a safety net for the poor and disadvantaged. And as more Illinoisans have crowded into the program, the poor and disadvantaged have actually lost access to care.

Lawmakers should heed Moody’s analysis. A budget with tax hikes is not the solution that can avoid a cash crunch.

Only real, structural reforms – to Medicaid, to pensions and to general spending – and a balanced budget without tax hikes can get Illinois back on track.