Ohio's Budget Report: Danger Ahead As Medicaid Expenses Exceed Projections

COLUMBUS (TDB) -- The costliest program in the state budget -- Medicaid health care for the poor and elderly -- is spending money faster than Gov. Ted Strickland and lawmakers projected earlier this year. A monthly financial report from the Office of Budget and Management reports that costs were $34.6 million over estimates in October. It says the state's lousy job market may be one reason 18,500 more people than expected have signed up for government paid health care. The report warns of "increased concerns about the Medicaid budget for the remainder of the biennium."

The state budget office also told the governor the economy would likely slow significantly next year.

Over the next two years, Ohio planned to spend $18.4 billion on Medicaid. Strickland got the state's monthly financial report last week. The complete text of the monthly financial report is here and it gives a snapshot of the state's income and expenses. It also tries to forecast general economic trends that can affect Ohio, and it sees a significant slowdown ahead in the coming months. The report does not use the word recession.

"Looking ahead, the widespread consensus is for a significant slowing in growth in the current quarter and during the first half of next year. The reasons are the ongoing deterioration in housing, an expected slowdown in business investment, and a very significant expected slowdown in consumer spending in response to the recent run-up in energy prices."

On Medicaid, the budget office appeared close to pressing an alarm button, noting that caseloads have risen since the summer. Medicaid costs nearly as much as schools, $14.9 billion, and colleges, $5.7 billion, put together. Any unplanned growth in Medicaid spending clearly could leave the state government in a pinch.

The budget office told Strickland:

"For three consecutive months, Medicaid caseloads have exceeded the estimate. Currently, there are 15,000 more recipients in the Covered Children and Families (CFC) population that expected with enrollment in the Healthy Families and Children in Care programs driving the increase. CFC caseloads peaked in August 2006 and declined steadily through June 2007. This decline has been attributed to increased citizenship requirements under the federal Deficit Reduction Act of 2005. The forecast for FY 2008 and FY 2009 assumed that caseloads would increase, however, it now appears that the increase may be steeper than anticipated.

"The Healthy Families category includes children and their parents with incomes up to 90% of the federal poverty limit. Enrollment increases in this category may be due to economic factors or successful outreach to eligible families who had not previously sought Medicaid coverage. At the end of the first quarter, Aged, Blind and Disabled caseloads have exceeded the estimate by 3,500 recipients. It is important to note that while this increase is small, this is the most expensive population group in the Medicaid program and is driving spending above the estimate in many categories of service."