Gov. Parson’s budget funds Missouri Medicaid expansion without cuts to other needs

Medicaid expansion will add $1.9 billion to the state budget in the coming fiscal year, most of it to be paid for with federal funds and the rest by anticipated savings from a cut in state costs for the current program.

The budget Gov. Mike Parson delivered to lawmakers Wednesday anticipates that approximately 275,000 low-income adults will enroll for medical coverage. Missouri voters in August approved expanding Medicaid to everyone in households with incomes at or below 133 percent of the federal poverty guideline.

The breakdown of costs, according to Parson’s budget, is $1.65 billion from federal funds, about $130 million from the state general revenue fund and the rest from a variety of sources, including taxes on medical providers.

About $100 million of the expense will come out of current Medicaid spending because the federal government will pick up a bigger share of the current program, said the governor’s budget director, Dan Haug.

In his State of the State Address, Parson said he was including Medicaid expansion, which he opposed, because it is required by the constitution.

“However, it is important to remember that the costs of this expansion will be significant – hundreds of millions of dollars, in fact,” Parson said in his prepared speech. “This will have a major impact on other areas of our budget, and we must plan accordingly … which means staying vigilant in maintaining the program’s integrity by protecting against fraud and waste.”

Paying for expansion, however, will not require Parson to cut any other item in the state budget, Haug said.

“For this budget, it has not caused some of those crowding-out issues,” Haug said. “My concern is going forward.”

Instead, state revenue and cash balances are so strong that it is likely Parson will lift remaining restrictions on spending this year and have $100 million to pay for one-time maintenance needs on state buildings.

Overall, Parson is proposing a $34.1 billion operating budget. That is down about $1.1 billion from the current year, with the decrease caused by the end of federal support for addressing the COVID-19 pandemic.

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Other major items in Parson’s budget for the coming year:

• State employees will receive a 2 percent pay hike on Jan. 1 at a cost of $23.5 million and the budget requests $5.3 million for incentive payments to top performers. There’s also $2.9 million to increase pay in the Department of Corrections to make those jobs more attractive.
• State colleges and universities will have their support restored to pre-pandemic levels at a cost of $68 million. Parson is also proposing a $19.6 million to increase student financial aid and $21.8 million to fund worker training programs for high-demand occupations.
• $5.3 million to fund new jobs as community mental health liaisons to help law enforcement when officers and the courts deal with people who have behavioral problems. An additional $15 million will fund six new crisis stabilization centers and $3 million to expand treatment courts. “These are important mental health investments for some of our most vulnerable citizens,” Parson said in his prepared text.
• $59.4 million to expand residential and in-home services for people with behavioral issues and developmental disabilities as well as $30 million to increase the rates paid to in-home services for the developmentally disabled.

The budget does not include some revenue that is likely but not 100 percent sure, Haug said.

While it is certain that the federal government will pay a bigger share of Missouri’s Medicaid costs, it is less certain that all states will continue to pay a smaller share because of the COVID-19 pandemic.

That extra 6.2 percent is likely to continue to the end of this year, Norris Cochran, Acting Assistant Secretary for Financial Resources in the Department of Health and Senior Services, wrote to governors in a Jan. 22 letter.

That is worth about $180 million every three months for Missouri. It is likely but not certain, Haug said, and the guidance came too late to be included in the proposed budget.

This story was produced by the Missouri Independent, a nonpartisan, nonprofit news organization covering state government, politics and policy.