Hidden Human Services Spending

What’s the main driver of spending in Harrisburg? It’s not education. The main driver of costs is the Department of Human Services, which includes Medicaid, child services, nursing home care and other assistance programs. But if you looked at this year’s General Fund budget you’d see a $13.7 million decline in human services spending, from $12.151 billion in 2017-18 to $12.137 billion for the coming fiscal year.

Did lawmakers cut human services spending?

On the contrary, the recently passed budget increases total human services spending by 5 percent. Lawmakers and Gov. Wolf used an array of one-time funds and moved more than $800 million in spending increases offline into the “shadow budget”—giving the illusion of stabilizing human service costs.

These maneuvers include:

• $75 million from an increase to the Quality Care Assessment: The QCA is a tax levied on hospitals; a portion of the tax goes to the general fund while the majority of the revenues return to hospitals in the form of Medicaid payments. As Medicaid payments increase, the state pulls down more federal matching funds. The 2018-19 budget increases the state’s portion of the QCA from $220 million to $295 million. Hospitals will receive an estimated $699 million net benefit from the assessment.
• $103.5 million from the Tobacco Settlement Fund: Medicaid benefits for workers with disabilities will be funded with 30 percent of the Tobacco Settlement Fund revenue. The fund is a recurring source, but there is no guarantee this money will go to Medicaid next year.
• $341.6 million from another tobacco lawsuit: The fiscal code instructs the state to use an additional one-time settlement with tobacco companies to fund the new Community HealthChoices program. This new mandatory managed care program provides home and community based care for individuals eligible for both Medical Assistance and Medicare (dual eligibles). The state hopes managed care will help these individuals (mostly seniors and the disabled) remain in their homes longer and avoid more costly nursing homes.
• $351 million from the final MCO gross receipts tax payment: Elected leaders are using the final payment from a defunct tax on managed care providers to shore up the Medicaid program. It’s yet another case of using one-time revenue for a recurring cost.

Hiding costs won’t help Pennsylvania’s human services programs serve people in need. Unfortunately, the systematic reforms that will help us move Medicaid patients to self-sufficiency and food stamps recipients to independence stalled in the Senate.

HB 2183 would begin the process of creating work requirements for healthy adults receiving Medicaid. Almost 500,000 healthy adults on Medicaid report no income. Similarly, HB 1659 strengthens work requirements for healthy food stamp recipients. More than 200,000 healthy Pennsylvania adults collecting food stamps are not working.

Prioritizing work for the healthy is overwhelmingly popular and received bi-partisan support in the House this spring, yet Senate leaders didn’t bring these bills for a vote.

These reforms would do more to increase the incomes of Pennsylvanians and reduce waiting lists for services than any infusion of taxpayer cash. Lawmakers would do well to make work requirements a top priority when they come back in September.