Iowa-based Plan Offers Option to Mitigate Deep Budget Cuts

A Wisconsin bill unveiled today offers a compromise on how to expand BadgerCare, while helping to avoid or scale back some of the deep cuts in the budget bill. The proposed legislation could save an estimated $241 million in Wisconsin’s 2015-17 budget, while expanding BadgerCare to an estimated 81,000 adults between 100% and 138% of the federal poverty level.

The compromise legislation, which is now being circulated for cosponsors by Representative Daniel Riemer (D – Milwaukee) and Senator Jon Erpenbach (D – Middleton), is similar to the Medicaid expansion plan being implemented in Iowa because the new BadgerCare coverage for adults over the poverty level would be private insurance plans purchased through the health insurance exchange or “Marketplace,” rather than the current public plan for BadgerCare recipients. This compromise would essentially continue the sort of coverage that adults over the poverty level can now get through the Marketplace, but the subsidies would be delivered through BadgerCare, rather than through the federal premium tax credits.

The biggest difference between Wisconsin’s current coverage for adults and what is proposed in the bill is simply that the compromise plan would enable the state to get almost full federal funding for the coverage of more than 148,000 childless adults below the poverty level who are now enrolled in BadgerCare. Wisconsin currently pays about 42% of the cost of covering those adults. The compromise could also make insurance affordable to many low-income adults who currently aren’t participating in the Marketplace, but that would depend on the details relating to premiums and cost-sharing that would have to be worked out between state and federal officials.

According to a preliminary Legislative Fiscal Bureau analysis, the bill would give the Dept. of Health Services (DHS) “considerable flexibility… to determine the specific provisions of the program, which then would be subject to negotiations with the federal government.” This approach would require a waiver similar to the one that Iowa received more than a year ago, and the proposal is modeled in many respects on the plan developed by Iowa’s Republican Governor, Terry Brandstad.

Ironically, the bill would save Wisconsin taxpayers less than a simple expansion of BadgerCare to 138% of the poverty level. That approach would save well over $300 million in the current biennium if it were put into place in January 2016. The savings are smaller under the compromise legislation because it is more expensive to subsidize private plans purchased through the Marketplace than traditional BadgerCare coverage. (The LFB memo spells out the assumptions upon which the savings estimate is based, and indicates that the amount saved would depend on the details of the final plan agreed upon by state and federal officials.)

The compromise addresses the concern raised by some lawmakers that Congress and the next president might repeal the enhanced funding for Medicaid expansions. (Of course, the same concern could be raised for the current premium tax credits for marketplace coverage, but that is rarely mentioned.) If the enhanced Medicaid funding ended, DHS could end the expanded coverage with the approval of the Joint Finance Committee.

In light of the deep cuts contained in Governor Walker’s budget proposal for 2015-17, pressure is mounting to expand BadgerCare and accept the enhanced federal funding that would enable lawmakers to substantially reduce those cuts. Although a simple BadgerCare expansion to 138% of the poverty level would be the better approach for low-income Wisconsinites and for the state budget, the compromise today offers a way to break the current impasse by relying on the private plans offered through the insurance Marketplace.

From www.wisconsinbudgetproject.org.