With the end of the first year of the biennium on June 30, the Department of Health Services (DHS) released their latest estimate on the Medicaid budget for the 2015-17 biennium. DHS projects that at the end of the biennium (June 30, 2017), the Medicaid expenditures will be below the appropriated levels set in the 2015-17 budget.

In March 2016, DHS projected that the expenditures for all funds would be $200 million less than the budgeted levels. The June 2016 estimate is 1.5 percent lower than the March numbers, mainly due to an enrollment decrease from March to May. In addition, interim Secretary Tom Engels cited other reasons driving the below budget numbers, including slow growth in prescription drug expenditures and personal care and home health services, revised nursing home utilization estimates, and higher drug rebate revenues.

Based on the revised June 2016 estimate, DHS projects that general fund (GPR) Medicaid expenditures will be three percent below the budgeted levels over the biennium. However, Engels cautioned that this trend can be quickly reversed if enrollment increases. He states that a three percent increase in monthly enrollment in fiscal year 2017 will increase Medicaid costs by $85 million GPR. DHS’ June estimate projects Medicaid GPR expenses to be $175 million below budget.

Engels cautioned in his letter that despite the optimistic projection, overall Medicaid expenditures for the 2015-17 biennium have increased seven percent, or $1.1 billion over the all funds 2013-15 budget level.

DHS will submit their 2017-19 budget request to the governor in September.