Cook County Health System’s FY2013 Budget Tied to Medicaid Expansion Plan

October 29, 2012

UPDATE: Cook County has received federal approval for a Medicaid expansion plan that is projected to bring in $99 million in net revenues in FY2013 and is a key component of the County’s FY2013 budget.

The approval, announced by the County on October 26, 2012, means that an estimated 250,000 low income Cook County residents will have early access to Medicaid coverage before Medicaid expansion begins under national healthcare reform in 2014.

As discussed here and here, the Cook County Health and Hospitals System hopes to enroll 115,000 of the newly eligible residents—mainly non-elderly, non-disabled adults without dependent children—in a new managed care program in FY2013. An estimated 69,000 of the patients are already served by the Health System but lack insurance of any kind and do not pay for their medical services. Net revenue from the expansion plan is expected to permit Cook County to hold its subsidy to the Health System in FY2013 at $253.8 million, unchanged from the level budgeted for FY2012.

On October 29, at a hearing on the Health System’s FY2013 budget before the County’s Finance Committee, Health System CEO Dr. Ram Raju said the expansion plan provides the potential for stabilizing the System’s finances but that effective implementation will present substantial challenges. Costs for the new patients will be reimbursed by the federal government at the regular rate of approximately 50% until the start of national Medicaid expansion, when 100% of costs will be covered by the federal government for the first three years.

At that time, patients with Medicaid coverage will be free to move to other healthcare systems. If Medicaid-covered patients decide to seek care from other hospitals and doctors, the Health System could be left with an even larger share of uninsured patients. “We have 14 months to improve patients’ experience so they will not leave us in 2014,” Dr. Raju said at the Finance Committee hearing.

Published August 28th, 2012

Cook County’s public health system is counting on $197.0 million in revenue from a Medicaid expansion plan to meet budget targets in FY2013.

As discussed here, the plan would give Cook County early access to federal funding for low-income, childless, non-disabled, non-elderly adults before they are scheduled to become eligible for Medicaid under national healthcare reform in 2014.

The expansion plan is the key component in the Cook County Health and Hospitals System’s preliminary FY2013 budget, which was presented at a Finance Committee meeting on August 24, 2012. At the meeting, Health System CEO Dr. Ram Raju said he hopes to receive federal approval for the plan by mid-September. The County’s 2013 fiscal year begins on December 1, 2012.

The preliminary FY2013 budget includes a County subsidy of $253.8 million. That is unchanged from the initial subsidy budgeted for FY2012 and $8.4 million higher than the subsidy in the adjusted FY2012 budget. The County subsidy, consisting of property, cigarette and sales taxes, is used to bridge the gap between the Health System’s operating revenues and its expenditures.

Most of the Health System’s patients lack insurance of any kind and generally do not pay for medical services. The System’s operating revenues come mainly from funding tied to patients covered by Medicaid and Medicare.

The Health System’s proposed expenditures for FY2013 increase by $80.1 million, or 9.0%, from the budgeted FY2012 level of $885.8 million to $965.9 million. The subsidy remains relatively flat because operating revenues are projected to increase by $71.8 million, or 11.2%, to $712.2 million from $640.4 million. The increase is due to projected revenues from the Medicaid expansion plan. Without the expansion-related revenues, total revenues would decline by $125.2 million, or 19.6%.

At the Finance Committee meeting on August 24, Dr. Raju said that the expansion-related revenue projection assumes that the program can enroll 115,000 patients, which he described as an aggressive target. Of that total, roughly 60,000 are already patients of the Health System, Dr. Raju said.

The table below compares the Health System’s preliminary FY2013 budget to the adjusted budget for FY2012 and estimated results for FY2012 as of June 2012. The table covers only General Fund operations of the Health System, which represent virtually all of its activities.

It should be noted that the revenue estimate for FY2012 was $65.2 million below budgeted FY2012 revenues. The shortfall would have been much larger without an increase of $42.2 million in one-time revenue enhancements related to Medicaid. At the Finance Committee meeting, Dr. Raju attributed the revenue shortfall to overly optimistic projections of Medicaid revenue in the FY2012 budget.

The annual budget process outlined in Cook County ordinance for the Health System—which has been governed by its own Board of Directors since 2008—is different from that of other components of County government. The budgets of other County offices are only reviewed by the County Board as part of the Board President’s recommended budget. In contrast, the Health System submits a preliminary budget to the County Board. After receiving approval from the County Board, the Health System’s budget is incorporated into the Board President’s recommended budget.

The Health System’s Board is expected to vote on the preliminary FY2013 budget at a meeting on September 5. Before the meeting, there will be three public hearings. A hearing was held on August 28 and other hearings are scheduled for August 30 and September 4. More information on the hearings can be found here.