Cook County Health System FY2014 Budget Tied to CountyCare

August 23, 2013


On August 23, 2013, the preliminary FY2014 budget of the Cook County Health and Hospitals System was unanimously approved by the Health System's Board of Directors. The Cook County Board is expected to vote on the plan in October. The Health System's preliminary budget will then be included in the County Board President's overall budget proposal for FY2014.

Original blog published on August 22, 2013:

Cook County’s public health system would receive a smaller subsidy from County taxpayers under a preliminary budget proposal for fiscal year 2014 that depends on the success of the CountyCare Medicaid expansion plan.

The proposed FY2014 subsidy is $175 million, down 30.4% from a budgeted subsidy of $251.6 million in FY2013. The actual FY2013 subsidy—including both County tax revenues and reserves needed to make up for a shortfall in revenues from CountyCare—is currently projected at $291.9 million.

CountyCare, which was approved by the federal government in October 2012, has allowed the Cook County Health and Hospitals System to sign up low-income adults for Medicaid before Medicaid expansion begins under the Affordable Care Act (ACA) in January 2014. The plan has brought in federal reimbursements for uninsured patients who had previously been treated at the Health System for free. Although the Health System is on track in signing up CountyCare members, the State of Illinois has taken longer than expected to process the applications.

The budget plan for FY2014 was presented at a meeting of the Health System’s Finance Committee on August 16, 2013 and could be approved at a Board of Directors meeting on August 23. Two public hearings have been held on the proposal and a third is scheduled for August 23, before any vote by the Health System Board.

A County ordinance requires that the Health System’s preliminary budget be passed by the Cook County Board before it is included in the County Board President’s budget proposal. The Health System hopes to win County Board approval in early October. Later in October Board President Toni Preckwinkle is expected to present her budget recommendation for FY2014, which begins on December 1, 2013.

Major features of the Health System’s preliminary FY2014 budget proposal include the following:

Budgeted FY2014 subsidy. More than half of the Health System’s charges are incurred by uninsured patients, who generally do not pay for their medical services. Most of the System’s operating revenues come from Medicaid. The County bridges the gap between the Health System’s expenditures and operating revenues through a subsidy consisting mainly of property, cigarette and sales tax revenues.

The budgeted subsidy for FY2014 of $175.0 million represents the difference between projected operating revenues of $950.7 million and expenditures of $1.1 billion. The subsidy was negotiated between the Health System and the Board President’s Office, according to statements at the Health System Finance Committee meeting on August 16. The proposed subsidy would be a reduction of $76.6 million, or 30.4%, from the budgeted FY2013 subsidy of $251.6 million and a reduction of $116.9 million, or 40.0%, from the projected actual FY2013 subsidy of $291.9 million.

If the Health System’s operating revenues differ from budget projections, then the actual resources needed to cover its operations will be higher or lower than the budgeted subsidy. This variance represents the Health System’s deficit or surplus. In recent years, Health System net assets have been adjusted to account for deficits or surpluses. In FY2013, for example, net assets are expected to be reduced by $40.3 million to account for a projected revenue shortfall. In FY2014 the System is asking for permission to use a portion of any excess revenues for operations rather than to increase net assets.

The following table shows the history of the System’s budgeted and actual subsidy from FY2008 to FY2014. The surplus or deficit shown in the table represents the increase or decrease in resources used to operate the Health System compared with the budgeted subsidy.

• CountyCare’s projected FY2014 revenues. The subsidy reduction in the FY2014 budget depends on a significant increase in revenues from CountyCare. CountyCare revenues are budgeted at $468.2 million in FY2014, up from a budgeted $197.0 million in FY2013 and projected actual revenues in FY2013 of approximately $122.3 million. Revenues in FY2013 would have been lower if the State had not agreed to make an advance Medicaid payment of $30 million, which must be repaid in FY2014.

The CountyCare revenue increase in FY2014 is related to higher federal reimbursements. States typically pay for Medicaid expenses and are then reimbursed by the federal government; the regular reimbursement rate for Illinois is 50%. In the case of Cook County, the non-federal share of Medicaid spending is paid by the County, rather than by the State. From calendar years 2014 through 2016, the federal government is scheduled to pay for 100% of the costs of Medicaid recipients who newly eligible under the ACA.

The projected revenue increase for CountyCare in FY2014 also reflects revenue from patients who applied in FY2013 but were not enrolled until FY2014. After a member is enrolled, the Health System receives a set monthly per member per month (PMPM) payment from the date of application and payments based on the volume of services for three months prior to the date of application.

• CountyCare’s projected FY2014 net financial impact. After expenditures, CountyCare’s net financial impact is budgeted at $277.4 million in FY2014. That represents an increase from a budgeted impact of $103.4 million in FY2013 and a projected actual impact of $28.7 million. Without the advance payment from the State, CountyCare expenditures would have been projected to slightly exceed CountyCare revenues in FY2013.

• CountyCare’s projected FY2013 performance. Applications for the program are running on track and are expected to reach 115,000 by the end of FY2013. The goal, however, was to have 115,000 members through the application process and fully enrolled. Enrollment in the plan has lagged because of the time required by the State to process applications. The number of enrolled members is expected to total 56,131 by the end of FY2013.

In June 2013 the Illinois Department of Human Services increased its processing staff to 100 from 30 at the start of the program, resulting in faster processing. Approximately 88% to 90% of submitted applications are approved.

Budget projections for FY2014 assume that only 56,131 members will stay in CountyCare after January 1, 2014, when members are allowed to seek care from other Medicaid providers. Health System officials believe that this is a conservative assumption and that more members will remain enrolled despite competition from other healthcare plans.

• CountyCare’s future. The plan officially ends on December 31, 2013, when federal approval ceases. The Health System has applied to the State to convert CountyCare into a Managed Care Community Network (MCCN). MCCNs are non-profit, provider-based healthcare networks certified by the Illinois Department of Healthcare and Family Services (HFS) that operate like HMOs.

The Health System’s longer term plan is to turn CountyCare into an HMO so it can offer health coverage to low-income residents who will be eligible for federally subsidized premiums through the new ACA-mandated health insurance exchange. Converting CountyCare into an HMO will require a change in State law, according to Health System officials.