©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. Wisconsin Taxation and Spending LaFollette School January 2005 By Thomas R. Hefty Reinhart Boerner Van Deuren s.c. Retired Chairman and CEO Wisconsin Blue Cross Blue Shield W233 N2080 Ridgeview Parkway

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 1 Wisconsin Taxation and Spending MEDICAID AND FEDERAL SPENDING THE MISSING LINK ●AMONG WISCONSIN’S LARGEST AND FASTEST GROWING PROGRAMS ●LARGEST FEDERALLY FUNDED STATE PROGRAM ●COVERS OVER 14% OF WISCONSIN POPULATION ●25% OF MILWAUKEE COUNTY AND NORTHERN COUNTIES ●8% OF DANE COUNTY ●5% OF METRO SUBURBS

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 2 Wisconsin Taxation and Spending--Medicaid Growth

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 3 Wisconsin Taxation and Spending WHY IS STATE MEDICAID SPENDING GROWING ●HEALTH CARE COSTS ●NEW PROGRAMS ● BADGERCARE ● SENIOR CARE ●LIMITS ON FEDERAL AID ●EXTENSIVE RANGE OF SERVICES

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 4 MEDICAID RANGE OF SERVICES AND EXPENDITURES WIS. PER ENROLLEE$$ U.S. PER ENROLLEE$$ CHILDREN$1074$1227 ADULTS$1283$1625 ELDERLY$13942$10026 BLIND & DISABLED$11280$9956 TOTAL$4657$3762

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 5 MEDICAID RANGE OF SERVICES AND EXPENDITURES PERCENTAGE OF MEDICAID SPENDING WISCONSINU.S. CHILDREN11%16% ADULTS6%10% ELDERLY38%30% BLIND AND DISABLED45%41% OTHER--3% TOTAL100%

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 6 Wisconsin Taxation and Spending WISCONSIN’S HEALTH CARE MARKET COMPARED TO NATIONAL AVERAGE (NON-ELDERLY) WIS.U.S.WIS.U.S. PRIVATE COVERAGE83.5%72.3%74.9%67.9% MEDICAID7.9%12.1%11.8%12.4% UNINSURED8.6%15.5%11.7%17.5%

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 7 Wisconsin Taxation and Spending MEDICAID IS LARGEST CATEGORY OF FEDERAL AID TO WISCONSIN STATE GOVERNMENT $$PERCENT OF NATIONAL PER CAPITA AVERAGE TOTAL FEDERAL5.6 BILLION87% MEDICAID$2.5 BILLION79%

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 8 Wisconsin Taxation and Spending WISCONSIN RANKING IN FEDERAL AID TO STATE AND LOCAL GOVERNMENTS PER CAPITA$$PERCENTAGE OF BUDGET U.S. AVERAGE$ % WISCONSIN$943 (35 TH )16.5% (41 ST ) MICHIGAN$ % IOWA$ % MINNESOTA$ % ILLINOIS$ %

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 9 Wisconsin Taxation and Spending EXCUSES FOR LOW FEDERAL FUNDING NO DEFENSE BASES AVERSION TO PORK BETTER GOVERNMENT ALWAYS RANKED LOW

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 10 Wisconsin Taxation and Spending HISTORICAL PERSPECTIVE WISCONSIN DID MUCH BETTER IN FEDERAL FUNDING IN THE MID-1980’S PER CAPITA $$ PERCENTAGE OF STATE AND LOCAL SPENDING U.S. AVERAGE$ % WISCONSIN$502 (19 TH )17.3% (15 TH )

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 11 Wisconsin Taxation and Spending FEDERAL FUNDS PERFORMANCE RANKING EXPLANATION FORMULA CRITERIA -CONGRESS EARMARKED FUNDS -CONGRESS STATE PROGRAM DESIGN -ADMIN/LEGISLATURE STATE PROGRAM ADMINISTRATION - AGENCIES COOPERATION OF LOCAL GOVERNMENT PRIVATE SECTOR PARTICIPATION

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 12 Wisconsin Taxation and Spending SOURCE OF MEDICAID FUNDING FEDERALSTATE GENERAL FUNDS OTHER U.S. AVG.59%33%8% WISCONSIN62%36.5%1.5% FMAP FORMULA BENEFITS WISCONSIN BECAUSE OF LOW AVERAGE INCOME

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 13 Wisconsin Taxation and Spending MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS I.DISPROPORTIONATE SHARE (DSH) WISCONSIN FAILED TO PURSUE DSH NOW FROZEN BY CONGRESSIONAL ACTION WISCONSIN AT MINIMUM PAYMENT LEVEL DSH AS PERCENTAGE OF MEDICAID SPENDING U.S. AVG.6.4% WISCONSIN1.2% MASSACHUSETTS 7.9% MISSOURI9.9%

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 14 Wisconsin Taxation and Spending MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED) II.INTERGOVERNMENT TRANSFERS (IGT) AND UPPER PAYMENT LIMIT (UPL) PHASED OUT BY FEDERAL RULE WISCONSIN PURSUED IGT’S AGGRESSIVELY FOR NURSING HOMES AND MILWAUKEE COUNTY GENERAL ASSISTANCE MEDICAL RELIEF ESTIMATED TOTAL UPL TRANSITION PAYMENTS TO WISCONSIN OF $1.1 BILLION (4% OF NATIONAL TOTAL) SOURCE. KAISER COMMISSION ON MEDICAID AND THE UNINSURED APRIL 2004

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 15 Wisconsin Taxation and Spending MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED ) III.PROVIDER/HMO ASSESSMENTS NURSING HOME ASSESSMENTS USED SINCE EARLY 1990’S LEGISLATURE REJECTED SPECIAL HMO TAX IN 2003 FEDERAL RULES REQUIRE EQUITABLE TAXATION/BENEFITS

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 16 Wisconsin Taxation and Spending MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED) IV.SHIFTING STATE/LOCAL FUNDED HEALTH SERVICES INTO MEDICAID OPPORTUNITIES REMAIN IN SCHOOLS, PRISON HEALTH, AND WELFARE REFORM SERVICES

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 17 Wisconsin Taxation and Spending MEDICAID AND FEDERAL FUNDING OPPORTUNITIES AND LIMITATIONS (CONTINUED) V.SPECIFIC SAVINGS ●SCHOOLS ONLY ONE-HALF OF WISCONSIN SCHOOL DISTRICTS DIRECTLY BILL FOR MEDICAID SERVICES ●WELFARE REFORM MEDICAID PROVIDES ONLY 0.1% OF WISCONSIN FUNDING COMPARED TO 4.9% NATIONAL AVERAGE

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 18 Wisconsin Taxation and Spending STRATEGIC MEDICAID CHALLENGES I.PROPOSALS TO CHANGE FMAP FORMULA ● 2004 GAO STUDY USES WISCONSIN AS EXAMPLE OF OVERPAYMENT II.SENIOR CARE IMPACT BY MEDICARE DRUG BENEFIT III.BADGERCARE PRIVATE MARKET IMPACT ● PROGRAM WAS INTEGRATED WITH MEDICAID – NOT PRIVATE MARKET COVERAGE IV.PHASEOUT OF UPL PAYMENTS V.ADMINISTRATION PROPOSAL TO CONVERT MATCHING FUNDS TO BLOCK GRANTS

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 19 Wisconsin Taxation and Spending MEDICAID AND FEDERAL SPENDING THE MISSING LINK-SUMMARY OPPORTUNITY IF WISCONSIN MATCHED NATIONAL AVERAGE OF PERCENTAGE OF TOTAL SPENDING STATE GOVERNMENT-ANNUAL IMPACT TOTAL FEDERAL AID TO WISCONSIN STATE GOVERNMENT$5.6 BILLION 23.6% TOTAL FEDERAL AID TO WISCONSIN STATE GOVERNMENT AT NATIONAL AVERAGE OF 29.6%$7.0 BILLION SHORTFALL$1.4 BILLION

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 20 Wisconsin Taxation and Spending MEDICAID AND FEDERAL SPENDING THE MISSING LINK-SUMMARY OPPORTUNITY IF WISCONSIN MATCHED TOTAL NATIONAL PER CAPITA FEDERAL AID STATE AND LOCAL GOVERNMENT PER CAPITA SPENDING FROM FEDERAL SOURCES WISCONSIN FEDERAL SPENDING$ 943 U.S. AVERAGE FEDERAL SPENDING$1037 SHORTFALL$ 96 PER CAPITA TOTAL$ 510 MILLION ANNUAL IMPACT

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 21 Wisconsin Taxation and Spending MEDICAID AND FEDERAL SPENDING THE MISSING LINK-SUMMARY OPPORTUNITY IF WISCONSIN MATCHED THE NATIONAL PER CAPITA AVERAGE IN FEDERAL MEDICAID SPENDING WISCONSIN FEDERAL MEDICAID SPENDING PER CAPITA$357 U.S. AVERAGE FEDERAL MEDICAID SPENDING PER CAPITA$453 SHORTFALL$ 96 PER CAPITA TOTAL MEDICAID SHORTFALL$510 MILLION ANNUAL IMPACT

©Copyright 2004 All Rights Reserved Reinhart Boerner Van Deuren s.c. 22 Wisconsin Taxation and Spending MEDICAID AND FEDERAL SPENDING THE MISSING LINK-SUMMARY ●MEDICAID IS THE LARGEST FEDERAL PAYMENT, THE LARGEST SHORTFALL, AND THE LARGEST OPPORTUNITY FOR BUDGET IMPACT ●IMPROVEMENT REQUIRES COOPERATION OF OTHER STATE AGENCIES AND LOCAL GOVERNMENTS ●WINNERS DESIGN IMPACT OF FEDERAL RECOVERIES INTO EVERY PROGRAM ●INCENTIVES FOR STATE EMPLOYEES, CONTRACTORS, AND LOCAL GOVERNMENTS