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Wisconsin TaxationWisconsin Taxationand Spendingand Spending

LaFollette SchoolLaFollette SchoolJanuary 2005January 2005

ByThomas R. Hefty

Reinhart Boerner Van Deuren s.c.Retired Chairman and CEO

Wisconsin Blue Cross Blue ShieldW233 N2080 Ridgeview Parkway

262-951-4534thefty@reinhartlaw.com

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL SPENDINGTHE MISSING LINK

● AMONG WISCONSIN’S LARGEST AND FASTEST GROWING PROGRAMS● LARGEST FEDERALLY FUNDED STATE PROGRAM● COVERS OVER 14% OF WISCONSIN POPULATION

● 25% OF MILWAUKEE COUNTY AND NORTHERN COUNTIES● 8% OF DANE COUNTY● 5% OF METRO SUBURBS

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Wisconsin Taxation and Wisconsin Taxation and Spending--Medicaid GrowthSpending--Medicaid Growth

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

WHY IS STATE MEDICAID SPENDING GROWING

● HEALTH CARE COSTS

● NEW PROGRAMS

● BADGERCARE

● SENIOR CARE

● LIMITS ON FEDERAL AID

● EXTENSIVE RANGE OF SERVICES

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MEDICAID RANGE OF SERVICES AND MEDICAID RANGE OF SERVICES AND EXPENDITURESEXPENDITURES

WIS. PER ENROLLEE$$

U.S. PER ENROLLEE$$

CHILDREN $1074 $1227

ADULTS $1283 $1625

ELDERLY $13942 $10026

BLIND & DISABLED $11280 $9956

TOTAL $4657 $3762

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MEDICAID RANGE OF SERVICES AND MEDICAID RANGE OF SERVICES AND EXPENDITURESEXPENDITURES

PERCENTAGE OF MEDICAID SPENDING

WISCONSIN U.S.

CHILDREN 11% 16%

ADULTS 6% 10%

ELDERLY 38% 30%

BLIND AND DISABLED 45% 41%

OTHER -- 3%

TOTAL 100% 100%

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

WISCONSIN’S HEALTH CARE MARKET COMPARED TO NATIONAL AVERAGE

(NON-ELDERLY)1995-2000 2003

WIS. U.S. WIS. U.S.

PRIVATE COVERAGE 83.5% 72.3% 74.9% 67.9%

MEDICAID 7.9% 12.1% 11.8% 12.4%

UNINSURED 8.6% 15.5% 11.7% 17.5%

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID IS LARGEST CATEGORY OF FEDERAL AID TO WISCONSIN STATE GOVERNMENT

$$ PERCENT OF NATIONAL PER

CAPITA AVERAGE

TOTAL FEDERAL 5.6 BILLION 87%

MEDICAID $2.5 BILLION 79%

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

WISCONSIN RANKING IN FEDERAL AID TO STATE AND LOCAL GOVERNMENTS

PER CAPITA $$ PERCENTAGE OF BUDGET

U.S. AVERAGE $1037 18.9%

WISCONSIN $943 (35TH) 16.5% (41ST)

MICHIGAN $1039 18.3%

IOWA $986 19.1%

MINNESOTA $969 15.4%

ILLINOIS $869 16.8%

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

EXCUSES FOR LOW FEDERAL FUNDING

• NO DEFENSE BASES• AVERSION TO PORK• BETTER GOVERNMENT• ALWAYS RANKED LOW

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

• HISTORICAL PERSPECTIVE• WISCONSIN DID MUCH BETTER IN FEDERAL

FUNDING IN THE MID-1980’S

PER CAPITA $$

PERCENTAGE OF STATE AND LOCAL SPENDING

U.S. AVERAGE $472 16.8%

WISCONSIN $502 (19TH) 17.3% (15TH)

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

FEDERAL FUNDS PERFORMANCE RANKING EXPLANATION

• FORMULA CRITERIA - CONGRESS

• EARMARKED FUNDS - CONGRESS

• STATE PROGRAM DESIGN - ADMIN/LEGISLATURE

• STATE PROGRAM ADMINISTRATION - AGENCIES

• COOPERATION OF LOCAL GOVERNMENT

• PRIVATE SECTOR PARTICIPATION

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

SOURCE OF MEDICAID FUNDING

FEDERAL STATE GENERAL

FUNDS

OTHER

U.S. AVG. 59% 33% 8%

WISCONSIN 62% 36.5% 1.5%

FMAP FORMULA BENEFITS WISCONSIN BECAUSE OF LOW AVERAGE INCOME

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS

I. DISPROPORTIONATE SHARE (DSH)WISCONSIN FAILED TO PURSUE DSHNOW FROZEN BY CONGRESSIONAL ACTIONWISCONSIN AT MINIMUM PAYMENT LEVELDSH AS PERCENTAGE OF MEDICAID SPENDING

U.S. AVG. 6.4%WISCONSIN 1.2%MASSACHUSETTS 7.9%MISSOURI 9.9%

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED)

II. INTERGOVERNMENT TRANSFERS (IGT) AND UPPER PAYMENT LIMIT (UPL)

PHASED OUT BY FEDERAL RULE

WISCONSIN PURSUED IGT’S AGGRESSIVELY FOR NURSING HOMES AND MILWAUKEE COUNTY GENERAL ASSISTANCE MEDICAL RELIEF

ESTIMATED TOTAL UPL TRANSITION PAYMENTS TO WISCONSIN OF $1.1 BILLION (4% OF NATIONAL TOTAL) SOURCE. KAISER COMMISSION ON MEDICAID AND THE UNINSURED APRIL 2004

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED)

III. PROVIDER/HMO ASSESSMENTS

NURSING HOME ASSESSMENTS USED SINCE EARLY 1990’S

LEGISLATURE REJECTED SPECIAL HMO TAX IN 2003

FEDERAL RULES REQUIRE EQUITABLE TAXATION/BENEFITS

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED)

IV. SHIFTING STATE/LOCAL FUNDED HEALTH SERVICES INTO MEDICAID

OPPORTUNITIES REMAIN IN SCHOOLS, PRISON HEALTH, AND WELFARE REFORM SERVICES

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED)

V. SPECIFIC SAVINGS●SCHOOLS

ONLY ONE-HALF OF WISCONSIN SCHOOL DISTRICTS DIRECTLY BILL FOR MEDICAID

SERVICES●WELFARE REFORM

MEDICAID PROVIDES ONLY 0.1% OF WISCONSIN

FUNDING COMPARED TO 4.9% NATIONAL AVERAGE

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

STRATEGIC MEDICAID CHALLENGES

I. PROPOSALS TO CHANGE FMAP FORMULA● 2004 GAO STUDY USES WISCONSIN AS EXAMPLE OF OVERPAYMENT

II. SENIOR CARE IMPACT BY MEDICARE DRUG BENEFIT

III. BADGERCARE PRIVATE MARKET IMPACT● PROGRAM WAS INTEGRATED WITH MEDICAID – NOT PRIVATE MARKET COVERAGE

IV. PHASEOUT OF UPL PAYMENTS

V. ADMINISTRATION PROPOSAL TO CONVERT MATCHING FUNDS TO BLOCK GRANTS

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL SPENDING THE MISSING LINK-SUMMARY

OPPORTUNITY IF WISCONSIN MATCHED NATIONAL AVERAGE OF PERCENTAGE OF TOTAL SPENDING

STATE GOVERNMENT-ANNUAL IMPACTTOTAL FEDERAL AID TO WISCONSINSTATE GOVERNMENT $5.6 BILLION 23.6%

TOTAL FEDERAL AID TO WISCONSINSTATE GOVERNMENT AT NATIONAL

AVERAGE OF 29.6% $7.0 BILLION

SHORTFALL $1.4 BILLION

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL SPENDINGTHE MISSING LINK-SUMMARY

OPPORTUNITY IF WISCONSIN MATCHED TOTAL NATIONAL PER CAPITAFEDERAL AID

STATE AND LOCAL GOVERNMENTPER CAPITA SPENDING FROM FEDERAL SOURCES

WISCONSIN FEDERAL SPENDING $ 943

U.S. AVERAGE FEDERAL SPENDING $1037SHORTFALL $ 96 PER CAPITA

TOTAL $ 510 MILLION ANNUAL IMPACT

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL SPENDINGTHE MISSING LINK-SUMMARY

OPPORTUNITY IF WISCONSIN MATCHED THE NATIONAL PER CAPITA AVERAGE IN FEDERAL MEDICAID SPENDING

WISCONSIN FEDERAL MEDICAIDSPENDING PER CAPITA $357

U.S. AVERAGE FEDERAL MEDICAIDSPENDING PER CAPITA $453

SHORTFALL $ 96 PER CAPITA

TOTAL MEDICAID SHORTFALL $510 MILLION ANNUAL IMPACT

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Wisconsin Taxation and SpendingWisconsin Taxation and Spending

MEDICAID AND FEDERAL SPENDINGTHE MISSING LINK-SUMMARY

● MEDICAID IS THE LARGEST FEDERAL PAYMENT, THE LARGEST SHORTFALL, AND THE LARGEST OPPORTUNITY FOR BUDGET IMPACT

● IMPROVEMENT REQUIRES COOPERATION OF OTHER STATE AGENCIES AND LOCAL GOVERNMENTS

● WINNERS DESIGN IMPACT OF FEDERAL RECOVERIES INTO EVERY PROGRAM

● INCENTIVES FOR STATE EMPLOYEES, CONTRACTORS, AND LOCAL GOVERNMENTS