In his 2020 State of the State address, Gov. Mike Parson took aim at Medicaid expansion, warning it would mean “a massive tax increase that Missourians cannot afford.”
The cost, he said, would consume money that could be better spent on education, workforce development and infrastructure.
Fast forward a year and those dire warnings were only faintly echoed in his 2021 address. He noted “the costs of this expansion will be significant…(and) will have a major impact on other areas of our budget, and we must plan accordingly…”
Missouri and Oklahoma on July 1 will be the 37th and 38th states to expand Medicaid coverage under the provisions of the Affordable Care Act, commonly known as Obamacare. Supporters failed for almost a decade to persuade the Republicans who dominate Missouri’s legislature to implement the coverage before taking the case directly to voters.
Despite the $1.9 billion total cost of Medicaid expansion, Parson found general revenue to spend more in every category he warned about in 2020.
There’s $131.8 million to restore budget cuts for public schools and increase education spending, $67.5 million to restore cuts to higher education, $21.8 million to restart the MoExcels workforce development program and $100 million for maintenance and repair projects on state-owned buildings.
And because the state is in the best financial shape in memory, Parson asked lawmakers to reserve $200 million for supplemental spending items – double the usual set-aside – and put $100 million in a state savings account.
“The claim that Medicaid expansion is going to cost us money from any other priority of the budget is just not true,” said state Rep. Peter Merideth, D-St. Louis and ranking minority member of the Budget Committee. “What we are going to see is that Medicaid expansion will free up money.”
Lawmakers should enact a bill to increase tax revenues, Parson said, but not to pay for Medicaid. Instead, the state should “consider ways to responsibly invest” new revenue from extending the state sales tax rate to online purchases, Parson said, pitching the proposal as an issue of fairness for retailers with physical stores in the state.
Lawmakers will begin digging into those proposals in earnest this week, starting with a House Budget Committee hearing Monday on the $799 million supplemental request to fund state government operations. Parson is proposing a $34.1 billion operating budget plan for year beginning July 1.
When voters approved the ballot measure enlarging coverage to all households with incomes at or below 138 percent of the federal poverty guidelines, the ballot language said the costs were uncertain.
It could cost as much as $200 million annually in general revenue, the fiscal analysis showed, or it could generate yearly savings of up to $1 billion.
Out of the $10.6 billion in general revenue spending in Parson’s budget, there is $129.1 million for the state’s share of Medicaid expansion. And deep in the Department of Social Services requests, lawmakers will find the first hints of savings in the current program.
The numbers aren’t huge, but expansion will save $1.6 million in general revenue in managed care costs and $2.9 million in hospital costs.
Under Parson’s budget, Medicaid is anticipated to cost $14.1 billion, including the expansion costs. The general revenue portion is projected at $2.7 billion, or 19.1 percent of the total.
That is $290 million more than appropriated for all Medicaid spending in the current fiscal year. But those appropriated amounts likely overstate the actual cost. Because of the COVID-19 pandemic, the federal government has been paying more for Medicaid since January 2020. That is now expected to continue through at least December, under guidance provided by President Joe Biden’s administration.
It is worth about $180 million every three months for the general revenue fund.
“That came way too late to get that into this budget recommendation,” Budget Director Dan Haug told reporters during a briefing Thursday.
The political capital spent over the past decade in support and opposition to Medicaid expansion make it the budget item likely to be most closely watched over the next four months.
The other big items in Parson’s budget should find a receptive audience among lawmakers.
Senate Appropriations Committee Chairman Dan Hegeman, R-Cosby, said he’s comfortable with larger set asides for supplemental items and creating what Parson’s budget calls the Cash Operating Expense Fund.
Legislation filed by Hegeman defines the fund as holding an amount of up to 2.5 percent of general revenue. It would give the governor the power to transfer money to make up deficits in general revenue appropriations for any purpose during an emergency related to a natural disaster.
“That is conservative budgeting, that’s fine,” Hegeman said. “This year we seem to have some money, it is just wise to hold some of that back to be able to use it next year, when we do anticipate the true economic impact of COVID.”
Parson’s budget for education fully funds the foundation formula, the basic aid program for public schools. Whether that is a $131.8 million increase in money through the formula over the current year or just $8.5 million depends on whether he releases $123.3 million currently withheld.
With an ending balance in general revenue expected to be $1.1 billion, a decision on releasing restricted funds is likely around the beginning of April, Haug told reporters. Parson has directed $61.5 million of federal CARES Act funds to schools.
The large restriction, the largest of the remaining items withheld by Parson, doesn’t seem to be creating hardships for schools, Hegeman said.
“None of the elementary and secondary schools in my district have been knocking on my door to get that released right now,” he said.