DPW Budget Update, September 2, 2010

In August, Congress passed legislation to provide additional federal Medicaid matching funds (FMAP) for states for the period January through June 30, 2011. However, this additional money is about one-third less than originally proposed and contained in Pennsylvania’s enacted budget for 2010-11. As a result, Governor Rendell asked each state agency to make adjustments in their budget. A link to all budget reductions can be found here.

Making reductions in DPW’s budget is particularly difficult given the array of mandated services we provide to Pennsylvanians, but we strived to make the necessary revisions to our budget while keeping a focus on our primary goals:

• Sustainability — preserving services for those who need them;
• Quality and results — ensuring services improve the lives of those who receive them; and
• Accountability — ensuring efficient use of tax dollars

Even with these reductions, we have successfully avoided making deep cuts to the array of essential services DPW provides to more than 2 million Pennsylvanians. Effective management of DPW resources and staff will enable the Department to meet the governor’s request without the need to reduce staff.

The Commonwealth’s budget still requires legislative action on a natural gas severance tax to generate $70 million to balance the state budget. This tax will ensure that out of state gas companies pay the environmental and public costs associated with increased drilling.

DPW Focus on Administrative Efficiencies

Beyond the budget reductions described below, DPW has taken significant administrative steps in the past few years to reduce costs including:

• Eliminating 200 positions since January. In all, DPW has decreased staff positions by 3,180 positions since 2003, making the existing complement the smallest in over 40 years and saving $230 million in salary and benefits. 
   
• In the pharmacy program, DPW instituted a preferred drug list (PDL) and an automated pharmacy prior authorization program resulting in $300 million in pharmacy savings since 2005.
   
• More than $614 million in costs were avoided or recovered in fiscal year 2009-10 from private insurers and other third-party sources for services that otherwise would have been paid through state-funded Medical Assistance.
   
• About $75 million was saved in fiscal year 2009-10 through the department’s fraud and abuse detection, cost avoidance and recovery efforts.

Summary of Budget Reductions by Program Area

Providing quality, cost efficient healthcare for millions of Pennsylvanians

Within the Office of Medical Assistance the recent budget reductions do not change eligibility or services for those receiving Medical Assistance (MA). In addition, funding for the required MCO rate increases as well as the dollars necessary to make payment on the FY 2008-2009 Physical Health MCO Pay for Performance program have been maintained. Although the core program has been preserved, some areas will experience a limited reduction consistent with the overall freeze amount announced by the Governor. Specifically, a 1.9% reduction was taken against a number of MA state appropriations such as OB/NICU, Burn Centers, Critical Access Hospitals, Trauma Centers, Academic Medical Center, Physician Practice Plan, Acute Care and Health Care Clinics.

Supporting individuals with mental health and substance abuse needs

In the Office of Mental Health and Substance Abuse Services (OMHSAS), the budget continues to maintain actuarially sound rates for behavioral health managed care programs, with no change in eligibility for the HealthChoices program. Reductions made:

• $5.4 million reduction in the mental health appropriation, with $3.1 million being absorbed internally to OMHSAS and 1.9% reduction to the county mental health base allocations.
   
• $1 million reduction in the Behavioral Health Services Initiative (BHSI)
   
• $1.5 million reduction in Act 152 programs (drug and alcohol programs)

Supporting individuals with Intellectual Disabilities and Autism

Within the Office of Developmental Programs (ODP), there are no reductions or change in eligibility to the mental retardation waiver programs or the private intermediate care facilities. Reductions made include:

• 1.9% reduction to the county mental retardation base allocations
   
• $250,000 reduction in the Autism State appropriation, this will not impact community waiver services

Working to create a safe, permanent family for all Pennsylvania Children

For the Office of Children, Youth and Families (OCYF) core child welfare services are maintained in the budget. Reductions in OCYF are:

• $8.867 million reduction in the child welfare state appropriation which will not impact the counties
   
• $11 million reduction in the TANF allocations in counties’ needs based budgets

Improving the early leaning of Pennsylvania Children

In the Office of Child Development and Early Learning (OCDEL) the budget continues to support early learning programs with no reductions in the Early Intervention, Child Care Services or the Nurse Family Partnership Program due to federal maintenance of effort requirements. Reductions in OCDEL are:

• 1.9% reduction to the child care assistance state appropriation. Though DPW will continue to maximize child care slots, a waiting list may result
   
• For the OCDEL appropriations within the Department of Education, the Preschool Early Intervention program was not impacted. Pre-K Counts and Head Start Supplemental programs were reduced by 1.9%

Other State Funded Programs

DPW will continue to support and value our many state funded programs. However, given the significant budget issues, reductions were necessary in a number of these programs. Limited reduction occurred in the following programs:

• Human Services Development Fund
• Homeless Assistance Program
• Legal Services
• Domestic Violence
• Rape Crisis