The budget process here at the General Assembly is drawing a lot of attention, so I have decided to dedicate this week’s entire newsletter to the subject.
For a broad discussion of the House’s budget plan please visit here.
This week’s newsletter will detail the Health and Human Services budget proposed by the House. In the following weeks, the newsletter will center on proposed cuts by the House to other areas of the budget, such as education.
The House is currently working on the budget, and their approach to balancing it is decidedly different than that of the Senate. Currently, the House’s budget will have no tax increase in it. That means that they will have to gut a slew of state programs to the point where it is harmful to the general public. Eliminating some programs and reducing funds to others is inevitable with the state of the economy. Everyone is going to feel the pinch. However, approaching this crisis from a “cuts only” angle is neither realistic nor wise.
THE HOUSE BUDGET
The Senate budget included a $54 million cut in personal care services and a $15 million cut in community based support programs for the mentally ill. The House budget goes much further, reducing personal care services by $131 million over two years. Their budget would also eliminate almost all community support services for mentally ill adults.
The Governor’s proposed budget and the budget adopted by the Senate included an expansion of 15,583 additional children to be covered by Health Choice, which provides health insurance to the children of low and middle income working families who may be unable to afford health insurance from another source. The House budget proposes placing a cap on enrollment for Health Choice. According to an estimate from the Department of Medical Assistance, only 2,126 of the 3,178 children in our district who are eligible for Health Choice are currently receiving it. If the proposed house freeze passes, the other 1,052 children will be prevented from having an opportunity to enroll in the Health Choice Insurance program until a currently enrolled child leaves.
The House budget also makes additional cuts to Medicaid benefits for adults. The House eliminates Physical Therapy, Occupational Therapy and Speech Therapy benefits for adults. They also reduce the adult dental and optical coverage available under Medicaid. The House’s budget called for $15 million and $22 million in spending cuts, respectively, on these programs. But cutting Medicaid programs also negatively affects State revenue.
THE REAL EXTENT OF THESE CUTS
Because of the Federal Stimulus program, the Federal Government now pays North Carolina three dollars for every one dollar that the state spends on Medicaid. The North Carolina Hospital Association (NCHA) estimates that hospitals lose four dollars in revenue for everyone one dollar the state cuts in spending. That money funds jobs within North Carolina’s large health care industry as well as the surrounding community. The NCHA estimated that because of associated jobs losses a $25.5 million cut would result in over $95 million worth of lost tax revenue and Federal funds.
The House’s budget also cuts Medicaid reimbursements to physicians, dentists, hospitals and other health care providers by 5.5%. This amounts to a savings of $148 million spent by the state. This cut would lessen the amount of providers willing to treat the poor who rely on Medicaid for their insurance coverage.
In our district, the implications could be severe. The Granville County Health System, which includes Granville Medical Center and all the ancillary services that it provides, would lose $300,000. The reduction would put services such as the Adult Day Care Program, the Community Alternative Program and Brantwood Long Term Care Facility into a “break even” state, meaning that any further cut in funding would have them operating at a loss.
These programs also depend on non-governmental funding through non-profit groups like United Way, which cannot always be counted on, particularly in difficult economic times. This dependence puts these programs in a tenuous position, with the potential of being reduced or completely eliminated in the future. According to L. Lee Isley, the CEO of the Granville Health System, if these cuts went through as proposed and then larger cuts were required in subsequent years (as is expected), then the entire medical system would be forced to reevaluate the core services that are provided and whether these programs were a fiscal possibility.
If the programs above were cut, the impact would be felt in a myriad of ways other than just the elimination of the service. There would be 75 high paying jobs that would be eliminated along with the programs. The families of the patients helped by the programs would be directly affected and would be forced to provide support for those who would no longer be supported by the state. For example, the Community Alternative Program, or CAP, is designed to help individuals who would need long term institutional care to stay in their own home. If it were eliminated, then the families of those individuals would bare the burden of either replacing the CAP support or putting the individual into long term care.
The impact of these cuts on children, on the elderly, on the poor and on the disabled can not be overstated. But these cuts also impact those of us who have private insurance. When hospitals provide an emergency health service to the uninsured, or provide a discount to an individual going through hard times, or receive a payment from Medicaid that does not cover the full overhead cost of the service, they are forced to make up the difference elsewhere. To remain open, hospitals will often increase what they charge private insurance companies, or individuals who pay for care out of pocket. One study found that approximately $1,017 of every family insurance policy purchased in the United States goes to cover cost increases linked to providing care for the uninsured. You can read about that study here.
Currently 21% of our state’s population is uninsured. In addition to the cost of providing uncompensated care, N.C. also loses between $4.2 billion to $8.3 billion annually in lost productivity due to uninsured sick workers, or caretakers of uninsured dependents needing to miss work. To read more about how the uninsured affect our state visit here.
AN ALTERNATIVE PLAN
As you can see, cutting spending is not just a matter of balancing the budget. Budget cuts have far reaching implications that are far more severe than just the original cut. And these are just a few of the cuts in Health and Human services. I have not listed the tremendous cut proposals in Education, Justice, or even cutting the number of state employees. This is a critical time for our state, and we must take great care with the difficult decisions that face us. Our decisions here will affect our state for many years to come.
Budget cuts are not the only way we can balance the budget. We have to look at all of the options available and exhaust all resources necessary. Among those options is adjusting how we collect revenue. I explained in previous newsletters the changes that the Senate would like to make to our state’s tax system. The Senate is working on a tax plan that would lower the sales tax by expanding taxes that cover services. Our Finance committee is still exploring these options for revenue enhancement while the House has, to date, not put forward a comprehensive tax proposal. For a recent discussion of the Senate tax plan, please visit here.
While many groups are apposed to raising taxes or changing our revenue systems (“cut your budget, not mine” being a favored phrase), there are many other groups who are calling for increased revenue collection as opposed to drastic cuts to government programs. The NC Council of Churches, the NC Association of Educators and the NC Justice Center’s Budget and Tax Center are all proponents of a tax increase to maintain essential government functions. For more detail on the support for taxes increases, please read here.
Over the next month I will take a hard look at the choices we have to make, but it does not seem possible to balance our budget without changes to our revenue system.
I would greatly appreciate you opinions on the budget situation and what you believe we should do. My office is here to help in whatever manner we can. It is an honor to serve as your Senator and I will do everything in my power to live up to that honor.
Sincerely,
Doug Berger