Rainy Day: Medicaid reserve fund idea makes little sense
State officials’ announcement that West Virginia’s Medicaid program next year will require $309 million less than had been anticipated earlier is good news, no matter how one views it.
But keep one thing about the funds firmly in mind: It is not “found money” for state government. Every dime of state revenue comes out of the pockets of Mountain State residents or businesses, one way or another. The $309 million is not in addition to what normally would have been raised through taxes and fees; it is merely cash state officials do not believe will be needed to maintain the Medicaid program next year.
Gov. Jim Justice has proposed spending $50 million of the amount on enhanced programs related to the health and safety of Mountain State children. So far, so good. As we have pointed out, initiatives such as Child Protective Services need additional funding.
Justice wants to use slightly more than one-third of the $309 million to ensure next year’s state budget is balanced. Again, remember, this is not “found money.” The governor’s proposal is merely that about $108 million be spent, but used for something other than Medicaid.
Finally, Justice wants to place $150 million in something he calls the Medicaid Families First Reserve Fund. He and other proponents of the idea describe it as a reserve fund that could be dipped into should the state run short of Medicaid money in the future. One description of the proposal referred to it as “like a Rainy Day fund … for Medicaid.”
Well, good for the governor for wishing to ensure the state can cover Medicaid expenses in the future, but we already have a mechanism to do that — the Rainy Day Fund.
There actually are two separate pots of money, referred to officially as the Revenue Shortfall Reserve Funds. By the end of December, they contained nearly $843 million, held in reserve to handle fiscal emergencies.
If the $150 million in unneeded Medicaid money has to be appropriated, why not just place it in the existing reserve funds? That way, it could be used for any fiscal emergency facing state government.
Justice says he wants to lock the $150 million up, in effect, to ensure it is available for Medicaid. But at any time in the future, legislators could rescind the Medicaid reserve fund law and use the $150 million for other purposes. Why not simply place the money in the primary Rainy Day funds to start with?