Counties not sure what state Medicaid cut will mean
By Matthew Whittle
Published in News on August 9, 2007 1:46 PM
It's been only a week since the General Assembly finally approved a permanent Medicaid relief plan, but county officials across the state are still trying to figure out exactly how the decision will affect their revenue streams.
The savings are supposed to start this year, but Wayne County Manager Lee Smith said he is not expecting any real impact until at least fiscal year 2008-09.
The plan will provide for a three-year phase-out of the counties' Medicaid expenses, in exchange for the gradual assumption of a half cent in local sales tax.
Statewide, Medicaid costs are expected to be around $500 million this year. By the 2010-11 fiscal year, the first full year the counties will be without the burden, costs are expected to reach about $671 million.
Currently counties pay 15 percent of the non-federal share of Medicaid.
Starting on Oct. 1, the state will begin taking over 25 percent of that -- 3.75 percent of the non-federal cost.
It will offset its increased expenses this year -- and this year only -- by withholding about 50 percent of the Public School Building Capital Fund, which is based on average daily membership and is funded through the state's corporate tax.
The counties are mandated to make up the difference in the school funding through their Medicaid savings and any hold-harmless payments made to them by the state. But if everything goes according to projections, each county is guaranteed to come out at least $500,000 ahead.
In Wayne County, the N.C. Association of County Commissioners is projecting the state to take over $1,370,585 in Medicaid expenses.
To help pay for that, it will withhold $718,528 of the school capital funding, but in the end, Wayne County's net savings is projected to be $652,057.
However, the county will still be spending about $6.1 million -- of the $8.4 million originally budgeted -- on Medicaid.
But, Smith said, he's not expecting the savings to be quite that great.
"For us, it will be neutral. Over the last two years, I've watched Medicaid spending increase so much, I'm expecting to spend what we budgeted this year," he said.
In Duplin County, the NCACC is projecting the state to take over $666,763 in Medicaid expenses.
To help pay for that, the state will withhold $331,304 from its ADM funding.
Then, because Duplin's balance will be only $335,459, the state will refund $164,541 to bring the county's total relief savings up to $500,000.
But, because the Duplin Board of Commissioners' 2007-08 budget fell short of what the state projected its Medicaid expenses to be, the county's actual savings this year will be only about $100,000.
"Basically we assumed about $400,000 in savings before we ever received it," said Duplin County Finance Director Teresa Lanier.
In the end, Duplin is projected to pay about $3.3 million of its projected $4 million cost.
As Medicaid reform continues into fiscal year 2008-09, the state will take over 50 percent of the counties' share -- 7.5 percent of the non-federal cost. Then in 2009-10, the state is expected to take over 100 percent of the counties share -- 15 percent of the non-federal cost.
"I'm optimistic and thrilled we're going to finally start doing better on Medicaid," Smith said. "I'm hopeful, and I think next year we have a chance to look at $1 million to $1.2 million. But that's not money I'm going to bank on until we get into the budget process next year and see what the legislature does."
He is also a little worried about the requirement that the counties, with the help of the state, hold the cities harmless for their portion of the local sales tax.
But to help make up for that lost revenue, the state is extending two options to county governments -- either a quarter-cent local sales tax or a 0.4 percent land transfer tax, both of which must be voted on in a public referendum.
For Wayne, the quarter-cent sales tax option would likely provide $2,570,523, while the 0.4 percent land transfer tax option would likely provide $1,425,674.
For Duplin, the quarter-cent sales tax option would likely provide $822,800, while the 0.4 percent land transfer tax option would likely provide $666,810.
However, neither county's board of commissioners has discussed the possibility of including one of those revenue options on November's ballot, although both have said it is something that would likely be considered.
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