Kasich Releases A" Bad News" Budget

The Kasich administration released its much-anticipated two-year budget package, March 15, cutting some $2.3 billion from various line items.

 The proposed budget is about $5 billion more than the last budget proposed by former Governor Strickland and approved by the 128^th General Assembly.  There is something in the budget for everyone to hate, with all areas of health care facing reductions due to the loss of federal stimulus dollars. 

 The Ohio University College of Osteopathic Medicine (OU-COM) is facing a 10 percent decrease across the board in all of its line item funding. Although  funding is decreased for every medical school line item by ten percent, the college receives a larger portion of its funding from primary care and geriatric line items than some of the other schools. The cuts don't include the loss of one time federal stimulus funds all schools had received.

On the other hand, Medicaid funding  is being increased by 28.3 percent to partially offset the loss of federal stimulus funding.  The increase is deceiving, since a 45% increase would be needed to keep Medicaid funding at the current level. 

 Medicaid spending currently accounts for 30% of the State’s entire budget and four percent of Ohio’s total economy.  About 4% of the Medicaid population (Aged, Blind and Disabled) account for almost 51% of the total spending. 

The proposed budget doesn’t make any reductions in Medicaid eligibility and avoids cuts in optional services, but according to Greg Moody, of the Office of Health Transformation, the goal is to put more emphasis on outcome-based medicine that rewards quality rather than quantity of services.  He said efforts to “transform Medicaid” will reduce over-all spending by about $1.4 billion over the biennium and include:

• Improving care coordination to achieve better health and costs savings by promoting health homes, providing accountable care for children, and supporting Ohio’s care coordination planning grant application to CMS;

• Integrating behavioral and physical health care services by elevating behavioral health financing to the state, managing behavioral health service utilization, and consolidating the Residential State Supplement program; and

• Rebalancing long-term care to enable seniors and the disabled to live in preferred settings by creating a unified long-term care budget, creating a single waiver, avoiding high cost institutional placements, linking nursing home payments to patient-center outcomes, consolidating programs for people with developmental disabilities, and reforming nursing facility payments.

The budget will affect physicians by ending hospital and physician payments for patients who must be readmitted due to hospital acquired infections.  It will also restore the pharmacy benefit “carve out” to managed care but require a more standardized set of prior authorization criteria across the plans.  The OOA had expressed concern to the OHT about reversing the carve out during the budgeting process, but we have received assurances that the Office of Health Plans will take action to prevent the wide inconsistencies in policies among plans that led primary care associations to seek the carve out in the first place.   

 Hospitals will also be required to pay a franchise fee,  but, unlike previously, will recover all the money they pay to extend the temporary five percent hospital rate increase that was set to expire in  June . OHT estimates the $371 million in franchise fee payments will result in a net gain of $554 million for hospitals and $434 million in general revenue funds for the state over the biennium.  In addition the budget calls for:

•  Enrolling 37,544 children with disabilities into Medicaid managed care plans, while beginning the development of Pediatric Accountable Care Organizations to address their long-term medical conditions.
•  Moving financial responsibility for community behavioral health from local boards to the state.
• Requiring Medicaid managed care plans reimburse hospitals at lower fee-for-service rates if they will not contract with an MCO plan.Eliminating the Children’s Buy-In Program, which provides insurance subsidies for families with uninsurable children between 300% and 500% of the federal poverty level.
• Combining PASSPORT, Ohio Home Care, Ohio Home Care/ Transitions Aging Carve-out, Choices, and Assisted Living into a single waiver program for individuals with physical disabilities and seniors.
• Linking nursing home payments to patient-centered outcomes by modifying the quality incentive payment.
• Adjusting nursing home facility rate reimbursements and make other changes to shift to more home and community-based services.

The Ohio Department of Insurance budget appears to eliminate funding for the Health Care Coverage and Quality Council, but includes funds for implementing many aspects of the federal Patient Protection and Affordable Care Act, including overseeing Ohio’s high risk pool, reviewing insurance policy form and rate filings for compliance with applicable state and federal law, and coordinating with the federal government.

The department is also preparing for the health insurance market reforms to take effect in 2014, including planning for implementation of a health insurance exchange in Ohio. The department has received two federal grants to meet its regulatory obligations under federal law: a health insurance exchange planning grant and a premium rate review grant.

According to State Health Director Ted Wymsylo, “The health portions of the budget focus on coordinated, person-centered care, which will improve Ohio’s health outcomes and reduce long-term health care costs.”

Currently, the Ohio Department of Health (ODH) has an annual budget of over $770 million. Seventy-two percent comes from federal funding, 12.7 percent from state general revenue funds (GRF) and the rest from permits and fees.   The ODH has created a web site to provide accurate and up to date information about the budget at www.odh.ohio.gov/budget. 

“As an agency aligned with the Governor’s Office of Health Transformation, we are also working with other state agencies and our local partners involved in the health care system to rebalance long-term care, improve care coordination, reform payment systems and identify performance measures to ensure improved outcomes,” said Wymsylo.