Putting Medicaid in the Larger Budget Context: An In-Depth Look at Four States in FY 2014 and 2015

West Virginia

Economic and Budget Outlook

Economy

After decreasing by 1.4 percent in 2012, the West Virginia economy grew by 5.1 percent in 2013, the third highest rate in the nation behind only North Dakota and Wyoming.¹ Growth in the state’s real Gross Domestic Product (GDP) was almost entirely driven by the mining sector, comprised primarily by the coal and natural gas industries. Without this growth, the state’s economy would have contracted as growth in other sectors was relatively flat or decreased including notable decreases in the government employment and construction sectors (-.15 and -.34 percentage points, respectively). As a result, the mining sector grew to 17.8 percent of GDP (compared to only 6.5 percent in 2002), reflecting the boom in shale gas extraction even as coal production has declined over the last several years.² Positive GDP growth did not translate into employment gains, however, as resident based employment fell by 3,500.³ The size of the West Virginia workforce also shrank, but by a larger amount – 10,400 – resulting in a net decrease in the state’s unemployment rate from 7.2 percent in 2012 to 6.5 percent in 2013, the lowest unemployment rate since 2008. In 2013, government made up the largest share of nonfarm payroll employment accounting for one in five jobs in the state.⁴

State Revenues

With the exception of a one-year state revenue rebound of 8.1 percent in FY 2011, West Virginia state revenue growth has remained low since the onset of the Great Recession with an average annual growth rate of only 0.7% between FY 2008 and FY 2013.⁵ Also for the first time in modern history, the state experienced two consecutive years of negative growth in state revenues for FY 2013 and FY 2014.⁶ In addition to the impact of the economic downturn, revenue collections have been negatively affected by a temporary motor vehicle tax credit program, the phasing out of a sales tax on groceries for home consumption between January 2012 and July 2013 and the phasing in of a coal severance tax revenue sharing program benefiting local county governments between FY 2013 and FY 2017. Looking ahead, state revenue collections are expected to increase by roughly 3.4 percent per year between FY 2013 and FY 2019.⁷

Budget for FY 2014 and FY 2015

At the start of CY 2014, Governor Earl Ray Tomblin faced both a current year budget shortfall for FY 2014 of $81.5 million and a projected budget gap for FY 2015 of $216 million. To close the FY 2014 shortfall, the Governor implemented a hiring freeze in December 2013 and in January 2014 called on state agencies to make mid-year budget cuts totaling $33 million.⁸ In January, he offered an Executive Budget proposal for FY 2015 that closed the projected budget gap which was driven largely by projected Medicaid expenditure increases.⁹

The Governor’s FY 2015 budget proposal cut agency spending by $70 million, made $14.5 million in one-time reductions, used $50.4 million from FY 2014 supplemental appropriations and Medicaid surplus, and relied on $83.8 million from the state’s Rainy Day Fund.¹⁰ Despite dipping into the Rainy Day Fund, the Governor’s budget was designed to ensure the fund’s balance would remain above the 15 percent threshold recommended by Wall Street rating agencies thereby assuring the state would retain its favorable bond ratings.¹¹ His FY 2015 budget also included funding for a 2 percent pay raise for teachers and school service personnel, a $504 million across the board pay raise for state employees, and an $87 million increase for Medicaid.

On March 14, 2014, the West Virginia legislature passed a FY 2015 state budget with higher spending levels that the Governor determined would increase the budget gap in future years. To avoid further depleting the state’s Rainy Day Fund, Governor Tomblin exercised his line-item veto authority to approve the FY 2015 budget after cutting nearly $67 million. Most of the cuts ($47.5 million) were to a transfer appropriation from the Rainy Day Fund to the Medical Services Trust Fund to help fund a portion of the Medicaid budget. The Governor planned to restore the Medicaid funding in part from revenues generated by separate legislation passed during a one-day legislative special session (the so-called “haircut bill”) designed to funnel lottery revenues into the state’s reserve fund.¹²

The second largest reduction was to the much debated appropriation for Medicaid in-home care for seniors. The House of Delegate’s original budget included a $12 million increase intended to cover the nearly 2,300 person waiting list. The budget as passed cut that funding in half.¹³ The Governor cut an additional $3.5 million; the remaining funding would allow the state to cover 335 additional waiver slots compared to the year before but substantially lower than the 2,300 proposed by the House of Delegates.¹⁴ Other cuts included reductions to local economic development assistance, family resource networks, legal services for domestic violence victims, cars and equipment for the State Police, in-home family education, child advocacy centers, libraries and senior centers.

2014 ACA Coverage Expansions

The 2010 Affordable Care Act (ACA) is designed to extend coverage to many of the 47 million nonelderly uninsured people nationwide, including the 267,000 uninsured West Virginians. The ACA enhances coverage across the income spectrum by expanding Medicaid eligibility for low-income adults and by providing premium tax credits to help people with moderate incomes (100-400% FPL) to purchase insurance directly through new Health Insurance Marketplaces.¹⁵ These provisions became effective during SFY 2014 with significant implications for state budgets and Medicaid programs across the country, including West Virginia.

Marketplace Coverage

The ACA provided states the option of establishing their own Marketplaces or relying on the federally-facilitated Marketplace (FFM), www.healthcare.gov. West Virginia was one of seven states that chose a “State Partnership Marketplace” model allowing the state to rely on the FFM but retain control over plan management and some consumer assistance activities.¹⁶ For 2014, one health insurance company (Highmark Blue Cross Blue Shield) offers 13 Qualified Health Plans in the individual Marketplace.¹⁷ The state received over $20.8 million in federal funding – including an Exchange Planning and two Level One Establishment grants – to develop its In-Person Assisters (IPAs) program and plan management activities.¹⁸ CMS also awarded and funded Navigator grants to three West Virginia organizations and 27 health centers were awarded outreach and enrollment assistance grants from HRSA to assist eligible consumers to enroll in coverage.¹⁹ As of April 19, 2014, over 19,800 West Virginians had selected a Marketplace plan (approximately 17% of the estimated 117,000 individuals eligible for Marketplace coverage²⁰), 86 percent of whom qualified for financial assistance.²¹

Medicaid Expansion

On May 7, 2013, Governor Tomblin approved the ACA Medicaid expansion for West Virginia increasing the income standard in 2014 for previously eligible low-income adults from 16 percent and 31 percent of the FPL²² for jobless parents of dependent children and working parents of dependent children, respectively, to 138 percent and extending coverage to non-disabled childless adults for the first time. While the state’s actuaries had predicted new enrollments in the first year of about 63,000, actual enrollment through the end of June 2014 increased by over 130,000 – more than twice the projected first year increase.²³ According to CMS, West Virginia had the fourth highest enrollment increase among all expansion states through June – a 45 percent increase compared to enrollment prior to the beginning of Marketplace open enrollment in October 2013.²⁴

West Virginia was one of only a handful of states taking advantage of an optional enrollment strategy offered by CMS that allows states to use income information from the Supplemental Nutritional Assistance Program (SNAP) to conduct “administrative transfers.” Using this strategy, West Virginia identified 118,000 people who were eligible for SNAP as well parents of children receiving Medicaid and sent them letters indicating that they would automatically be enrolled in the Medicaid expansion if they signed and returned the letter. State staff also made follow-up phone calls. After receiving a positive response, the state sent out a second round of letters and made more phone calls. An estimated 71,000 individuals responded to the letters and calls.²⁵

Delivery System Reforms

Managed Care

West Virginia has operated a risk-based Medicaid managed care program – Mountain Health Trust – since September 1996. Under this program, the state currently contracts with four managed care organizations (“MCOs” – Coventry Health Care of West Virginia, The Health Plan of the Upper Ohio, Unicare, and West Virginia Family Health) to provide medically necessary Medicaid services to low-income families, children and pregnant women in a 55 county area; behavioral health, long term care, and non-emergency medical transportation services are “carved out” of the MCO contracts.²⁶ Children’s dental services were added to the state’s MCO contracts in FY 2014, and the state plans to add behavioral health services in 2015. Also, the state plans to enroll the ACA Medicaid expansion population into MCOs in FY 2015 or early FY 2016.²⁷ As of September 2014, there were approximately 200,000 members enrolled in Mountain Health Trust.²⁸ West Virginia also operates a small primary care case management program (Physician Assured Access System” (PAAS) program.)²⁹ As of July 1, 2014, the state estimates that approximately 41 percent of its members were enrolled in MCOs, 1 percent were enrolled in the PAAS program and 58 percent remained in fee-for-service.³⁰

Health Homes

On July 1, 2014, the West Virginia Department of Health and Human Resources, Bureau for Medical Services launched a Health Homes initiative (authorized under ACA Section 2703) focused on members in a six county region who suffer from bipolar disorder and who may have Hepatitis B or C.³¹ The Health Home consists of a multi-disciplinary team that helps members manage medical conditions and medications, remember doctor appointments and understand medical tests and results. Teams will also work with doctors, counselors and specialists to support recovery and prevent other complications. As of July 2014, eight providers are approved to serve as Health Homes: Cabin Creek Health Systems, FMRS Health Systems, Marshall Health, Prestera Center for Mental Health, Process Strategies, Southern Highlands, WV Health Right, and WomenCare, Inc.³²