Pay now or later?

State Comptroller Dan Hynes wrote a letter to the editor that published in Springfield’s State Journal-Register that continues his effort to force conversation about the state’s delayed Medicaid bills. The topic is old, yet there could be an increased interest, some say urgency, to fix the problem in light of Gov. Rod Blagojevich’s recent statements that he’ll continue to push to expand a state health care program to 147,000 people without legislative approval.

Another 147,000 people in a Medicaid program means more bills to pay and, without adequate cash coming in to pay those bills, more debt. The comptroller’s point for rekindling the debate relates to “Section 25” of the State Finance Act (scroll down to the bottom to “fiscal year limitations”). State agencies are allowed to — and often do — defer medical bills until they can pay them with next year’s revenues. And they don’t have to notify the General Assembly to do so. The comptroller’s letter to the editor says, “In essence, then, the General Assembly has given the governor a blank check for health care spending.”

Hynes adds that the “loophole” also misrepresents the state’s current fiscal condition. His office says currently, Medicaid bills aren’t as backlogged as they have been, but the backlog exceeded $2 billion two years ago according to a March report. (You can see a here chart dating back to 1990.) Health care providers are currently waiting an average of two months for payment from the Department of Healthcare and Family Services. The agency can make expedited payments to doctors and hospitals that care for a lot of Medicaid patients, but everyone else has to wait as a result, says Carol Knowles, the comptroller’s spokeswoman. Because of Section 25, there’s no limit to how long agencies can hold their medical bills (other types of bills have to be paid by August 31 each year).

The comptroller wants to eliminate that. “For years I have urged the elimination of the Section 25 loophole, arguing that its existence allows state leaders to deny the true costs of state-provided health care and to sidestep requirements that the state maintain a balanced budget,” Hynes says in his letter.

He drafted legislation last spring that would have tightened the Section 25 rule and required the state to pay medical bills within four months of the new fiscal year. The October 31 deadline would give a little leeway in case of a cash flow problem or a complicated billing process at the end of the previous fiscal year.

Democratic Rep. Will Davis of Homewood sponsored the measure and says the objective was to try to avoid constantly carrying a deficit. Despite gaining bipartisan support, it went nowhere. Davis says the measure was still a legitimate effort and important issue for his community, where some providers care for mostly Medicaid patients. “Some people have tried to make it be a political issue between [the comptroller] and the governor. I really don’t think it’s political. It has a definite impact on my community and how people are being served in my community.”

Sen. Christine Radogno, a Lemont Republican and Deputy Minority Leader, says there’s consensus that Section 25 gives too much flexibility to the administration and that it should be tightened. Senate Republicans also sponsored a package of measures dealing with fiscal responsibility even before the governor’s recent actions to advance his health care plan without legislative approval. Radogno says she’ll try again but realizes it could share the same fate as a lot of good government and ethics measures. “None of that kind of stuff is moving.”

It also would be super hard to eliminate Section 25 for two reasons: One, the first year could actually cost a lot of money and time for state agencies that have to process their medical bills by a certain date if they don’t have enough cash. The Department of Healthcare and Family Services, for instance, said in a fiscal note to the General Assembly that an unintended consequence could be that cash-flow problems in the agency could require medical providers to file a claim with the state’s Court of Claims. And two, lawmakers would have to have the political will to end the practice of deferring bills. As it stands, if they push off $2 billion of bills into the future, that frees up $2 billion they can spend now on initiatives in their districts.

“It helps them avoid the tough decisions,” Knowles says. “The first year of undertaking a change like this would be very painful and difficult for the state, but the consequences of not doing are much greater.”