Rauner’s proposed budget holds the line on the Illinois health-care spending

Health-care savings come from proposed cuts to state-employee health insurance, reinstating Medicaid reforms and ending duplicative services.

Gov. Bruce Rauner’s inaugural budget proposal for fiscal year 2016 is an important first step in reining in state government spending on health care. The proposed budget focuses on three key areas of health care: Medicaid, state workers’ health-insurance coverage and public health.

Medicaid

While there is no single Medicaid appropriation in the Illinois state budget and the program operates from multiple agencies (primarily from Department of Healthcare and Family Services), the Medical Assistance spending by the Department of Healthcare and Family Services provides a good approximation of total Medicaid spending in the state. This totals approximately $19 billion in the proposed fiscal year 2016 budget.

The proposed budget calls for an 18.9 percent reduction in general funds (from assumed fiscal year 2016 spending levels had fiscal year 2015 spending been maintained). The proposed savings are derived primarily from reinstating many of the original Medicaid reforms that were part of the original Save Medicaid Access and Resources Together Act that was passed on a bipartisan basis in 2012 and included eligibility verification measures.

Next steps: Medicaid should be transformed into a sliding-scale premium assistance program that targets resources to those who need it the most. In addition to reinstating a private vendor to verify Medicaid eligibility and weed out fraud, continuous front-end and point-of-service verification should also be considered.

State-employee health insurance

The governor’s proposed budget calls for $700 million in savings for the State Group Health Insurance Program, which includes coverage for medical, prescriptions, vision, dental and life insurance for state employees. While these savings are contingent upon successful union negotiations, they assume reductions to the richness of available health-insurance plan options and employee cost-sharing. At present, active state employees contribute about 17 percent of the total cost for their own coverage, as well as their dependents, which is far less than most state workers across the country pay, let alone what private-sector workers in Illinois pay.

Next steps: The value of some health-insurance benefit plans for Illinois’ active state employees and their dependents could be sufficiently high enough to trigger the Affordable Care Act’s “Cadillac tax,” which imposes an excise tax on the most lavish employer-sponsored health-insurance plans. The Cadillac tax is scheduled to take effect in 2018. If the state continues to offer the current plan options, some state-employee health plans will be subject to this tax in the near future, with more triggering the excise tax in the long term. State lawmakers should avoid subjecting Illinois taxpayers to this tax altogether, which could cost $2 billion over the next 20 years.

Illinois Department of Public Health

The governor’s proposed budget calls for a 17.5 percent reduction in general funds toward the Illinois Department of Public Health, or DPH (from assumed fiscal year 2016 spending levels had fiscal year 2015 spending been maintained). More than half of the proposed savings are derived from reductions in health-care services that are available elsewhere as the result of the Affordable Care Act. This seems to indicate that the governor acknowledges that continuing duplicative programs is wasteful.

Next steps: The DPH had increased its headcount by 20 percent and its total agency spending by 40 percent between fiscal year 2008 and fiscal year 2015. Illinois lawmakers should next consider capping agency headcount and spending to the state’s population growth rate and Consumer Price Index (CPI). This would provide long-term controls on state government growth.

Rauner’s budget address demonstrates that the new administration is committed to taxpayer fidelity and to prioritizing tax dollars toward core services. The Governor’s proposals in the area of health care is a step in the right direction.