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Medicaid Spending Could Bust 2013 Budget

by | Oct 2, 2012 4:30am
() Comments | Commenting has expired
Posted to: State Budget

State Comptroller Kevin Lembo certified a nearly $27 million deficit Monday and warned that a slow national and state economic recovery could continue to impact the 2013 budget.

In this letter to Gov. Dannel P. Malloy, Lembo reported that his office generally agrees with the Office of Policy and Management’s current budgetary deficit projection, which reflects a deterioration of $30 million from last month.

The biggest budget-busting number could be the increasing enrollment in Medicaid. 

“Despite weak sales tax revenues, the state could still reach its revenue targets due to a positive income tax trend and other factors. Our deficit projection is driven by the spending side, where the rising Medicaid caseload continues to grow and will likely run $100 million over budget,” Lembo said.

Medicaid added more than 1,700 additional clients in the month of August alone — a one-month increase of 0.7 percent, and well above budget expectations, Lembo said.

Lembo estimated that Medicaid will run $100 million over budget, but about half of that will be offset by a federal matching grant. The other offset to the $50 million in net higher Medicaid spending is a $20 million reduction in debt service cost from lower-than-anticipated rates of borrowing.

“I am especially concerned with the sales tax trend in light of slower personal income growth in the state,” Lembo wrote. “Based on second quarter 2012 results released by the Bureau of Economic Analysis, Connecticut’s personal income growth slowed from 1.4 percent in the first quarter of 2012 to 0.9 percent in the second quarter. The state’s income growth ranking fell from 13th highest in the nation to 34th.”

It’s troublesome because sales tax receipts have historically tracked closely to personal income.

Data from the state and federal Departments of Labor and other sources show continued slow growth this year, while employment numbers were particularly troubling, Lembo said.

According to the state Department of Labor, Connecticut lost 6,800 payroll jobs and the unemployment rate rose to 9 percent. This is the second largest monthly job loss since the jobs recovery began in 2010, and it has pushed the state’s unemployment rate above the national level of 8.1 percent.

Over the 12-month period ending in August, the state has added a net 1,100 jobs to payrolls. Based on this data, Connecticut has recovered just one quarter of the jobs lost during the recession.

Despite the poor employment statistics for the state, initial claims for unemployment insurance continued a downward trend in Connecticut, falling 2.9 percent over the 12-month period ending in August.

The data is confusing.

The state has not seen a rise in the number of people seeking unemployment benefits for the first time, Labor Department Research Director Andy Condon said last month. The number actually dropped slightly from July to August. At the same time, Malloy said tax withholdings rose 3.6 percent after adjustment.

“Those two trends are the opposite of what you would expect to see if the state was losing jobs at the rate suggested in this report,” Malloy has said.

Still, the governor said he was well aware the state faces strong headwinds both nationally and internationally.

Connecticut’s average hourly earnings were down 1.1 percent from August of last year, and weekly private sector pay fell 1.4 percent from August of the previous year.

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(7) Archived Comments

posted by: christopherschaefer | October 2, 2012  5:19am

“Our deficit projection is driven by the spending side, where the rising Medicaid caseload continues to grow”. Is anyone surprised? Shuffling more people over to Medicaid is precisely the goal of ObamaCare. You can start fixing the state’s deficit by getting rid of federal budget-busters like Rosa DeLauro.

posted by: Lawrence B. Cook | October 2, 2012  9:09am

The Affordable Care Act provision expanding Medicaid enrollment does not take effect until January 1, 2014.


“Expands Medicaid to all individuals not eligible for Medicare under age 65 (children, pregnant women, parents, and adults without dependent children) with incomes up to 133% FPL and provides enhanced federal matching payments for new eligibles. Implementation: January 1, 2014”

Expands Medicaid to all individuals not eligible for Medicare under age 65 (children, pregnant women, parents, and adults without dependent children) with incomes up to 133% FPL and provides enhanced federal matching payments for new eligibles.

posted by: JamesBronsdon | October 2, 2012  10:33am

“You never want a serious crisis to go to waste.” “This crisis provides the opportunity for us to do things that you could not do before.”  Rahm Emanuel.
Your opportunity is coming, Governor Malloy. Go BIG!  Nationalize the insurance companies. Unionize the mall workers.  Equalize our take-home pay with French tax rates.  If we’re driving off the cliff, might as well see if we can sprout wings.

posted by: christopherschaefer | October 2, 2012  2:43pm

To L.B. Cook:
Right you are. The CURRENT bloating of Medicaid is due to the economic stagnation state-wise under the Malloy administration and nationally due to the policies of the Obama administration: http://www.forbes.com/sites/scottatlas/2012/10/02/the-unraveling-of-obamacare/

posted by: cjmalon | October 3, 2012  6:50am

There is an economic incentive for people to stay on Medicaid even if their employer offers health insurance. Most Husky patients have no copays and no deductibles. This is a better deal for the employer who doesn’t have to pay for insurance, and the employee who doesn’t have to contribute anything to the cost of the insurance. A win/win for both. Those who lose out are the taxpayers who pay for all of this, and the health care providers who get reimbursed at much lower rates. And it will get much worse when the floodgates open in 2014.

posted by: lkulmann | October 3, 2012  12:38pm

I have a different take on the subject. Could it be that the State is actually complying with Medicaid? Is it not that easy to deny Medicaid recipients the benefits they are entitled to due to increased transparency? So, CT is in for a big financial surprise. Let’s review…CT State employees can no longer tap off the low income entitlements ie D Snap…many people were denied medical benefits creating a Class Action Lawsuit due to computer and paperwork delay ‘issues’ at DSS ... Now we have an influx of people who have exhausted their Unemployment benefits. This is going to be very interesting to watch unfold. Honestly, I can’t wait to see all CT residents get their fair share of the pie. Enough favoritism. Grow up…

posted by: christopherschaefer | October 3, 2012  6:06pm

“The CBO/JCT [Congressional Budget Office/Joint Committee on Taxation] estimate [re. cost & effect of ObamaCare] basically hinges on a two-fold set of assumptions.  First, the estimators appear to assume that the decision gives states flexibility not only over whether to implement the expansion at all, but also, to what extent.  That is, the estimators seem to assume that the decision somehow converts the mandate into an option and furthermore, that it creates a raft of new state implementation sub-options where the 2014 Medicaid expansion group is concerned, so that expansion can be partial rather than full…The second, (at least implicit) assumption on the part of the estimators is that the [HHS]  Secretary [Sebelius] somehow has newfound powers as a result of the [Supreme Court] decision to convert a mandatory coverage group into a raft of state options governing not only the timing of state implementation…but also the degree of implementation a state will choose (i.e., the question of reasonable subcategories of coverage). The estimators never explain the basis for this assumption…The CBO/JCT partial implementation assumptions are open to serious legal questions…But the bottom line is that the choices facing states and the Secretary may be far less flexible than the CBO/JCT staff analysis implies. The judgment of NFIB v Sebelius may allow a state to exclude its poorest residents entirely from coverage, to the ultimate detriment of life and health.” http://healthaffairs.org/blog/2012/07/31/cbos-updated-affordable-care-act-estimates-resting-on-shaky-assumptions/ In other words—like virtually everything that comes out of the CBO—their report is based on mathematical gimmickry that would earn an F in Economics 101—and ultimately ObamaCare does nothing to ensure protection of the poor.