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DPW secretary frets over state Medicaid funding while financial analysis projects increased tax money

By , - Last modified: April 24, 2013 at 10:56 AM

An arrangement that provides millions of dollars a year for Pennsylvania's Medicaid program may be in jeopardy, according to Beverly Mackereth, acting secretary of the Department of Public Welfare.

In a letter to the state legislature’s four appropriations chairmen and an accompanying news release, Mackereth said the Centers for Medicare & Medicaid Services has recently indicated in writing and in ongoing conversations that it will be addressing the gross-receipts tax on managed care organizations through national guidance and will initiate conversations with Pennsylvania after releasing that guidance.

Since 2009, Pennsylvania has imposed a 5.9 percent gross-receipts tax on MCOs, using the proceeds to pull down more federal matching Medicaid dollars.

“If the federal government reduces or takes away that ability to draw down additional funding, it could mean up to $1.53 billion less for Medicaid in Pennsylvania over seven years if the state were to choose to expand the program,” the news release said.

Mackereth noted that third-party reports touting the savings under expansion of the Medicaid program utilize and assume continuation of the GRT arrangement.

“I’m very concerned that not everyone has the facts, and this includes the fact that over a billion dollars for our Medicaid program is in doubt,” Mackereth said. “That’s why we continue to push for full clarity from the federal government before we make any decisions about the future of the Medicaid program here in Pennsylvania. It just makes sense.”

The department also noted concern on the future of the hospital quality care assessment, a 2.95 percent tax on the net inpatient revenue of approximately 180 healthcare facilities, which is another arrangement for leveraging federal funding. The GRT and the hospital assessment will provide more than $100 million in the coming fiscal year, which can then be used to draw down another $131 million in federal funding based on the current match rate.

The department’s message came just hours after the Independent Fiscal Office released an analysis that found that if Pennsylvania expanded Medicaid, annual net state expenditures between 2016 and 2021 would decline $190 million and tax revenues would increase as follows:

  • Personal and corporate income taxes, $65 million
  • Sales and use taxes, $35 million
  • Gross receipts tax, $115 million.

It said federal expenditures under expansion would increase by $3.2 billion per year. IFO was created by Act 120 of 2010 to provide revenue projections for use in the state budget process along with impartial and timely analysis of fiscal, economic and budgetary issues.

Overall, it found that expanding Medicaid would be to the state’s benefit by about $430 million annually. Without expansion, the analysis said, Pennsylvania’s average net expenditures would increase by $75 million per year.

“Most of the commonwealth’s savings under expansion would be generated by transferring individuals currently served by General Assistance to the federally funded Medicaid program,” said IFO director Matthew Knittel.

General Assistance is primarily state-funded, while the federal government will cover 100 percent of the costs of Medicaid expansion for the first three years and a significant share of the cost in the years thereafter.

The IFO analysis considers only the incremental impacts of Medicaid expansion. It does not address the costs or savings of the Patient Protection and Affordable Care Act in general.


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