Arkansas News Bureau

LITTLE ROCK — State officials no longer expect to see a shortfall in the state Medicaid budget in the next fiscal year, though a shortfall is still expected for the following year, Gov. Mike Beebe said Friday.

Beebe said previously that a $60 million Medicaid shortfall was projected by next July, but he said Friday that "we now believe we will have sufficient Medicaid funding for the coming fiscal year."

"But our improved national standing for per-capita income means that federal matching funds for Medicaid will be decreased," the governor said in his weekly column and radio address. "The result is a projected Medicaid shortfall in the hundreds of millions of dollars by fiscal year 2014."

State Department of Human Services Director John Selig said fewer people have become eligible for Medicaid than the agency projected.

"We have tended to budget about a 5 percent growth rate in the number of eligibles in Medicaid, just because that’s historically what we’ve seen and because with the economy being relatively bad we thought we might see some uptick," Selig said. "As it turns out, in the last couple of years we’ve seen about 2 percent growth, probably, in the number of eligibles."

Selig also said the state has been doing a good job of managing costs.

But Selig also said the state recently received notification from the federal government that because its per capita income has risen relative to other states, its federal Medicaid match will decrease from 71 percent to 70 percent.

The state’s annual Medicaid budget is about $5 billion, so a 1 percent decrease in federal matching funds means the state’s obligation will increase by $50 million.

DHS already was projecting a deficit of over $200 million for the fiscal year that starts July 1, 2013. Selig said the agency is still working on a new projection, but he expects the shortfall that year to be between $200 million and $300 million, depending on how much money is budgeted for the agency between now and then.

The governor has cited the Medicaid crisis as one of the main reasons for launching an effort to revamp the state’s payment system for health care providers. The overhaul is aimed at shifting from a fee-for-services system to a system in which providers are paid for bundled episodes of care.

Beebe spokesman Matt DeCample said Friday the news that a shortfall is not coming as quickly as projected does not mean the overhaul will be delayed.

"We’re going to proceed with the same urgency that we are already," he said. "We’re not going to slow it down because of the change in the projection. It just means that we do have a little more time before the biggest hit comes."

State officials previously identified nine areas that were targeted for changes due to be implemented by next July. Selig said Friday that work groups are now focusing on six priority areas: Pregnancy and neonatal intensive care, developmental disabilities, cardiovascular care, attention deficit hyperactivity disorder, upper respiratory infections and hip and knee care.

Long-term care, back pain and type 2 diabetes are no longer priority areas, Selig said. He said prevention is now being looked at by the work group on upper respiratory infections, and hip and knee care has replaced back pain as a priority area.

July is still the target date for implementing changes in those areas, Selig said.

"We feel like we’ve still got to move very aggressively," he said. "Because of the change in match rate, If anything there’s even a greater urgency, when we look out two or three years, to have a system that’s well on it’s way to reform."