Governor's Budget Recommendation Aligns With Academy's Priorities

Governor Rick Snyder presented his two-year budget recommendation during a joint hearing of the Senate and House Appropriations Committees on February 10. The $54.9 billion budget is comprised of $10.2 billion in General Funds (GF), or state funding, and $12.5 billion in School Aid Funds. The proposed $24.71 billion budget for the Department of Health and Human Services accounts for the largest single share (45%) of the state's total budget. Of this amount, $14.27 billion ($1.82 billion GF) will go toward the state’s projected Medicaid caseload for physical health medical services.

The budget included several notable additions, including $195 million for additional help in tackling the Flint Water Crisis. This funding will largely go toward long-term health and educational support for the children and residents of the city.

At the recommendation of the Governor’s Pharmacy and Therapeutics Committee, the budget includes $17.3 million GF to expand available treatment for Medicaid beneficiaries with Hepatitis C. The budget also recommends $3.25 billion gross ($1.9 billion GF), which will go toward recommendations provided by the Mental Health and Wellness Commission, as well as support for Medicaid mental health services and Medicaid substance abuse treatment. $63 million gross will go toward expanded coverage for applied behavioral analysis treatment for youth with autism up to the age of 21.

In his budget proposal, the Governor specifically calls on the legislature and health provider community to work together on policies that better integrate physical and behavioral health services. To that end, his recommendation orders MDHHS to transfer the management of Medicaid behavioral health services from Community Mental Health (CMHs) to the Medicaid Managed Care Organizations.

MAFP 2016 Budget Priorities

With regard to the Academy’s 2016 budget priorities, the Governor’s two-year budget recommendation includes welcomed developments for Family Physicians, Family Medicine residents and medical students in Michigan. Among MAFP priorities is level funding for the Michigan Essential Health Provider Program, also known as the State Loan Repayment Program, at $3.591 million gross. Prior to 2012, this program, which provides loan forgiveness for eligible primary care providers who serve into underserved areas, had been zeroed out for several years and primarily relied on local/private, as well as federal dollars from the National Health Service Corps. 

The Governor calls for the Medicaid Primary Care Fee Uplift to be funded in the upcoming fiscal year at $33 million GF, level funding from the current fiscal year. Originally known as Medicaid/Medicare parity, this policy increased Medicaid rates for primary care services provided by certain primary care providers to 100% of Medicare rates. When federal funding lapsed, the state picked up at the tab and has since funded the increase at around 78% of Medicare rates.

In his budget recommendation, the Governor also calls for an extension of the Health Insurance Claims Assessment (HICA) Tax—a broad-based tax on paid health claims—through 2025. Any final decisions on HICA will not affect the current budget as HICA is currently not set to expire until December 31, 2017. At the same time in anticipation of the expiration of the use tax on Medicaid health plans—another significant revenue source—the state government will need to move on a long-term plan. The use tax is set to expire on December 31, 2016. Extending the sunset date for HICA is one recourse policymakers have to avert a potential shortfall in the general fund. According to the Senate Fiscal Agency, it is estimated that HICA would generate approximately $350 million a year in revenue for the state. The Academy has been largely supportive of extending the HICA to ensure solvency in the MDHHS budget.

Another budget priority for the Academy includes funding for the Healthy Michigan Plan—the state’s Medicaid expansion program—which now provides coverage for over 600,000 enrollees. Since its inception, the program has been funded entirely by the federal government; however, as was anticipated, the state is expected to begin contributing in Fiscal Year 2017 with a 5% math. The Governor’s budget recommendation includes $108.7 million general fund, $3.42 billion gross for the Healthy Michigan Plan.

Finally, the proposed budget recommends no cuts to Graduate Medical Education (GME), requesting $162.8 million in gross fudning ($56.1 million general fund). This development was welcomed by many in light of the Governor’s traditional practice of cutting GME or proposing alternative ways to finance the program. In concert with the proposed funding for GME, the budget also includes mandates to assess the current funding structure of GME and opportunities to expand training for future primary care physicians in Michigan—much of the language was carried over from last year’s budget.

Despite the tragic events in Flint and ongoing challenges surrounding Detroit Public Schools and infrastructure, the Governor’s budget recommendation on Wednesday reflected a largely healthy financial position and encouraging progress in the state.

Encouraging the legislature to adopt the Governor's recommendations is the next step, and these issues will be front and center during the upcoming Michigan Family Medicine Advocacy Day on February 23!