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The state’s backlog of unpaid Med-icaid bills are approaching record levels andcould double if lawmakers fail again to con-trol costs and adequately fund the program.
Under Illinois law, bills incurred in one year gen-erally must be paid with that year’s appropria-tions.
There is an exception for Medicaid re-imbursements, however, that allows the state topay those bills with appropriations from futureyears.
This exception is meant to ensure thatdoctors and hospitals get paid even if their billsarrive late, but its broad language has turned thisexception into a “loophole” that allows Medic-aid bills to pile up.
The scal year 2012 bud-get exploited this loophole in an unprecedentedfashion.
The availability of Medicaid services to patientsis not determined by appropriation. State andfederal standards generally determine what ser- vices patients can receive and which patientscan receive them. The state then determines therates that doctors and hospitals can charge forthese services. When a doctor sees a Medicaidpatient, he bills the state for services providedunder these guidelines. State and federal law re-quires that those bills must be paid. Legislativeappropriations are irrelevant to the costs actually incurred, in the same way that a person’s check-ing account balance is irrelevant to his creditcard balance. The way to trim Medicaid spending is not tocut appropriations, but to trim Medicaid costs. As the director of the Illinois Department of Healthcare and Family Services explained, thescal year 2012 appropriation “cuts” don’t actu-ally reduce costs, they simply continue a “patternof deferring payment of bills.”
By cutting only appropriations, the budget merely lets the billspile up until next year. Illinois just gave itself alonger grace-period to pay its bills.
Illinois’ Medicaid program gets its funding frommultiple sources. Because Medicaid is a jointstate-federal program, the federal governmentprovides Illinois with roughly half of the fundsnecessary to run the program.
Illinois coversthe remaining share through a combination of
The way totrim Medicaid spending is not to cut
but to trim Medicaid costs.
state taxes, local taxes and taxes on health careproviders.
Since 2000, the federal government has pickedup on average 48.7 percent of Illinois’ Medic-aid costs. State taxes account for 34.8 percentof the costs and the remaining 16.5 percentcomes from local taxes and provider taxes.
The federal share temporarily increased withthe stimulus, but has now receded to pre-stim-ulus levels.
Fiscal year 2012 budget
This year’s budget, although smaller at rstglance, actually increases spending. In scalyear 2011, Illinois appropriated $10.7 billion ingeneral revenue and related funds to Medicaid,the payment cycle was approximately 35 days,and the scal year ended with $763 million inunpaid Medicaid bills on hand.
By contrast, in scal year 2012 Illinois appro-priated $9.295 billion in general revenue and
Graphic 2. Medicaid spendingin Illinois by funding source
Source: Author’s calculations of average share of Medicaid spend-ing by funding source for scal years 2000 through 2008, based upon National Associations of State Budget Ofcers’ annual ex-penditure reports.