Corbett pushes back Medicaid payments in budget

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HARRISBURG -- When Gov. Tom Corbett laid out his proposed budget last week, he said "sound budgeting and spending discipline" were key.

But the biggest single source of savings in the proposal, some critics charge, is merely an accounting gimmick -- delaying a $394 million payment to Medicaid managed-care providers.

Making the payment a month later -- at the start of a new fiscal year in July 2015, rather than June 2015 -- pushes the cost from the proposed 2014-15 fiscal year budget into the following year's budget.

Jay Pagni, a spokesman for Mr. Corbett, said the proposal for the one-time move was made "rather than going back to the taxpayer for a tax hike."

Payments are made every month from the state to managed care organizations, or MCOs, the private health insurance companies that provide health insurance plans like UPMC for You or Gateway Health Plan for Medicaid recipients.

"[This] is not really a savings, but they're just not paying the bills when they come due," said Michael Rosenstein, who coordinates the Coalition of Medical Assistance Managed Care Organizations, an association of the state's managed care plans.

"The [proposed] delay in payments is very problematic," Mr. Rosenstein said, as it also causes hundreds of millions in federal funds to be delayed as well.

The idea is not unprecedented, however.

"This is a budget gimmick that was used in prior times by the Rendell administration," said Sharon Ward, executive director of the left-leaning Pennsylvania Budget and Policy Center.

Medicaid, the state and federally funded program to provide health care to low-income people, is one of the largest cost drivers in the state's budget, consuming close to 30 percent of the general fund. One in six Pennsylvanians is covered by Medicaid; many are disabled, children or elderly.

While these monthly payments have been delayed before under previous budgets, it means MCOs will likely have to borrow to fill the gap, Mr. Rosenstein said, in order to be able to pay providers such as doctors, hospitals and pharmacies in a timely way.

Patricia J. Darnley, the new CEO of Gateway Health, a Pittsburgh-based insurer that manages Medicare- and Medicaid-related plans, said that the payment delay could be problematic, but "we're working with DPW on how best" to accommodate the state's needs against those of its Medicaid organization.

A one-month payment delay, she said, could have "ramifications from it across the board, [depending] on plans' abilities to pay their bills." Some might have to draw down on credit, and borrowing money to pay bills makes those bills more costly in the long run, she said.

"The burden that they [managed care organizations] are assuming is certainly significant" under this proposal, said Miriam Fox, executive director for Democrats on the House Appropriations Committee.

"The plans still get paid," Mr. Pagni said. "They will continue to be paid."

It's not clear if legislative leaders will go along with this idea; Mr. Corbett laid out a number of proposals in his $29.4 billion general fund budget last week and his address kicks off weeks of appropriations hearings and months of legislative wrangling before the state enacts a budget June 30.

"There are some concerns that have been expressed [about the proposed delay]," said Steve Miskin, a spokesman for House Majority Leader Mike Turzai, R-Bradford Woods.

In addition to the payment delay for managed care providers, there are several one-time revenue boosts proposed, which has prompted many Democrats and critics to label the budget unsustainable. One-time sources include $225 million in private equity investments and cash reserves from the tobacco settlement fund and health venture investment account to the Public School Employees' Retirement System; $150 million from reducing from five years to three the time unclaimed property is held before being claimed by the state; and $75 million from lifting a Rendell-era ban on new oil and gas leases on state forest lands.

"They've deferred a lot of the hard decisions to next year," Ms. Ward said.

Kate Giammarise:, 717-787-4254 or on Twitter @KateGiammarise. Bill Toland contributed to this article.

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