Florida Medicaid: Already Cut to the Bone…And Now Facing Threat of Compound Fracture
July 7, 2011

What currently poses a bigger threat to Florida’s health care safety net: legislative or congressional proposals to undermine the Medicaid program?  That’s actually a trick question, to which the answer is, unfortunately, a combination of state and federal threats.

Threats in Washington

With Republican proposals to undercut Medicare in Congress facing strong opposition, the pressure on Medicaid has only intensified. As the program providing health coverage for only the very poorest and often sickest children, seniors and people with disabilities – individuals with few resources and no political clout – Medicaid is a far easier target than Medicare.  

As a result, proposals that cut Medicaid and put Medicaid recipients at risk remain squarely on the table in Congress.  Among them:  the conversion of Medicaid to a "block grant" program (capping federal funding to states) and the elimination of the "maintenance of effort" requirement (allowing states to tighten eligibility).

And with a deadline on raising the federal debt ceiling looming, even President Obama has indicated a willingness to consider cuts to Medicaid as part of a compromise, perhaps trimming $100 billion from the program over the next decade.  The mechanisms discussed for exacting these cuts include a so-called "blended rate," whereby the various federal matching rates for different components of Medicaid and the Children’s Health Insurance Program would be replaced with a single statewide match rate. Although that may seem like a helpful simplification of Medicaid, it would facilitate an across-the-board federal funding cut, and perhaps even set the stage for a block grant.

Threats in Florida

Meanwhile, most states -- including Florida -- began new fiscal years July 1 amidst continuing recession-fueled budget shortfalls.  Because Medicaid is funded through a state-federal partnership and the federal stimulus funds have dried up, the Medicaid program has already been hit hard.  Although Florida and all states have great flexibility in running their Medicaid programs now, many governors, including Rick Scott, have been demanding more.

A block grant would provide that flexibility, but also shift more of the burden for sustaining Medicaid onto Florida. However, legislative leaders have blasted Congress for the burden Florida bears already, and they enacted major changes to Medicaid during the 2011 session in an effort to curb state spending on Medicaid.

Controlling state expenditures is the aspect of flexibility that seems of greatest importance to the legislature, as exemplified by the Senate’s proposed version of the recent Medicaid overhaul (although not the one ultimately approved by the full legislature). Under that proposal, the legislature would have been able to impose a Medicaid spending cap of its own. If state spending were ever on pace to exceed that cap, cuts to eligibility and benefits would be required.

However, Florida lacks the authority under current federal law to impose such a cap, which is likely why that was not part of the final version of the legislation. Rather, the legislation that did pass seeks to contain costs primarily by shifting patients into “capitated” managed care plans and giving those plans unique power to vary benefits, an initiative fraught with many pitfalls of its own.

The Compound Threat

In the months ahead, Congress could cap or reduce Medicaid funding, give states the flexibility to reduce their own spending, or both. In Florida’s case, any of those actions would snap Florida’s already strained Medicaid safety net, rendering the program unrecognizable.

For instance, states may provide coverage to individuals beyond what is considered the bare minimum under federal Medicaid law today, though only about 6 percent of Florida’s Medicaid spending is used to provide coverage above that minimum. So any significant flexibility given to Florida would be used primarily to cut into Medicaid eligibility in ways inconceivable until now. The (U.S.) House Republican budget plan calls for cuts of precisely that scale, slashing Florida Medicaid enrollment by 55 percent by 2021.

Floridians should recognize that any congressional or legislative action purporting to make Medicaid more flexible or predictable threatens services and eligibility for the most vulnerable Floridians, thousands of jobs, and tens of billions in economic activity.

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Rejecting Federal Money Results in Health Services Not Delivered and Jobs Not Created
July 6, 2011

Florida’s rejection of at least $54 million in federal dollars for health-care reform hurts Florida in two ways.  Refusing federal money allocated for Florida not only deprives Floridians of necessary services, but also delivers another small blow to a state economy already struggling to create jobs.

The decision to turn down the money, made by the governor and legislature to be consistent with their legal challenge to the Affordable Care Act, conflicts with the overall welfare of Floridians. Furthermore, declining the money results in the federal government redirecting it to another state, even though a portion of it came from Florida taxpayers.

The refused money, contained in several grants, would have provided:

* hospice care for children

* aid to help elderly and disabled Floridians get out of nursing homes and return to their homes

* help for low-income seniors to buy medication

* home visiting with at-risk families

* funding to promote healthy lifestyles and help those with chronic illnesses

* financial assistance with setting up a health insurance exchange program and to monitor health insurance rates

Refusing the money also will do harm to the highest priority of state leadership:  creating new jobs.

Although estimating economic and employment impacts is an inexact science, the fact is that money flowing into a state from external sources recirculates through the economy, creating a multiplier effect.

Most of each dollar paid to a business or worker is spent again for payment of expenses before the money leaks out of the state and no longer adds to the state economy.

Applying a conservative multiplier of 1.5 means that the $54 million in foregone revenue would have generated an additional $27 million of economic activity, for a total of $81 million in indirect and direct benefits.

At the state’s per capita income of about $39,000, the rejected money would have created or supported more than 2,000 jobs as it flowed through the state’s economy.  That number of jobs isn’t huge compared to the more than 900,000 unemployed Floridians, but each job is important in helping put the jobless back to work.

The choice to decline federal money for ideological reasons is shortsighted.  It results in both health services not delivered to Floridians and jobs not created for them. 

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Cutting Corporate Income Tax Unwise, Economist Says
April 20, 2011

Governor Rick Scott has renewed his call for the legislature to adopt big tax cuts even as billions of dollars are being cut from state programs like education and Medicaid. 

“I remain certain that any budget I sign into law will do the following things: reduce the size and scope of government, reduce the cost of government, and pass those savings on to taxpayers in the form of tax cuts,” Scott said in his weekly radio address.

“The budget proposal I sent to the legislature does those three things. I will not compromise on these principles.”

The “no compromise” talk raises the issue of a possible veto of the state budget, the St. Petersburg Times said.

The tax cuts he wants:  "Business and property tax cuts are critical to make Florida No. 1 in job creation. Lowering taxes will attract businesses and jobs to our state. I am confident that, with your help, the Legislature will make the right decision.”

Scott continues to advocate for a cut in the state corporate income tax, even though Florida’s tax is relatively low and so riddled with loopholes that few companies pay it.  

"Slashing the corporate income tax would do little, if anything, to improve an already business-friendly tax structure or to create jobs," FCFEP said in a February report.  "But it would do much to decrease the level of services necessary to support a decent quality of life, which is the foundation of economic development.  (See "Keeping and Modernizing the Corporate Income Tax Will Best Serve Florida; Corporate Tax Cut Would Force More Service Cuts While Doing Little to Create Jobs.") 

So far, legislative leaders have resisted any pressure to adopt sweeping tax cuts.  A prominent Florida economist suggests that they should continue to do so.

“There is not much room for improvement as far as the tax climate in Florida is concerned and trying to be the cheapest date in the country is not going to bolster the number of suitors Florida has,” writes Dr. Sean Snaith, director of the Institute for Economic Effectiveness at the University of Central Florida.                   

“There is very little to win in our race to the tax bottom,” Snaith said in his quarterly Florida and Metro Forecast.  “Those tax revenues could be used more effectively to grow the economy through investment in infrastructure or education.  These things would be far more attractive to business than a marginal improvement in the business tax climate.”

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