SPRINGFIELD — A federal judge on Friday ordered Illinois to start paying $253 million more in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year, worsening a cash-flow problem caused by two years of budget-free spending by state government.
U.S. District Judge Joan Lefkow’s ruling came after lawyers representing Medicaid patients and attorneys for the state were unable to agree on a plan to deal with bills and pay down a $3 billion backlog owed to health care providers.
The ruling requires the state to start promptly paying all new Medicaid bills, which is estimated at about $586 million per month, and to pay down $2 billion of its bill backlog in payments spred out over the course of the coming fiscal year. The federal government pays half of those costs, so the bottom line for the state will be $253 million per month and $1 billion in backlogged bill payments over the next year.
Comptroller Susana Mendoza‘s office earlier in the week had offered to pay an additional $150 million per month, but the plaintiffs rejected it, saying it wasn’t enough. The $150 million would have only cost the state $75 million because of the federal match, and Mendoza’s office said that was all the state could spare while meeting other demands.
Now, Mendoza said Friday’s ruling would cause her to likely have to cut payments to the state’s pension funds, state payroll or payments to local governments. Payments to bond holders won’t be interrupted, she said.
“As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday’s ruling by the U.S. District Court takes the state’s finances from horrific to catastrophic,” Mendoza said in a statement. “A comprehensive budget plan must be passed immediately.”
In court arguments Wednesday, patients’ attorney David Chizewer likened the situation to a misbehaving child provoking a frustrated parent.
“What they secretly want is for the parent to step in and stop the behavior,” Chizewer said. “I think the state is asking the court to step in.”
Lefkow stepped in two years ago, when Illinois’ budget impasse began, and ordered the state to continue making payments to managed care organizations under Medicaid, a state and federal program that provides health care to poor people. The decision was one of many court orders that helped allow the state to continue operating for two years, and spend far beyond its means, without a formal budget in place.
As the impasse continued, bills at the comptroller’s office have piled up, reaching nearly $15 billion. The Medicaid bills that Lefow ordered to be paid have taken a backseat to other state obligations, including public employee payroll, contributions to state pension systems, distributions to local governments, state aid for elementary and high schools, and payments on state debt.
Mendoza’s office has argued those payments are part of its “core priority” category. Each is either required by a state court order or written into state law. In recent weeks, the comptroller has warned that the state doesn’t even have adequate cash flow to make those payments, and will be at least $185 million short by August.
Earlier this month, Lefkow decided it was reasonable for Medicaid providers to expect their bills to be paid, if not in full, then enough to maintain patients’ access to care. The judge ordered the two sides to negotiate a payment plan. At the time, the pile of bills owed to providers was estimated at $2 billion. Now Mendoza’s office says it’s more like $3 billion.
Talks broke down, however, and the lawyers representing Medicaid patients went back to court to ask the judge to compel the state to start making about $1 billion in monthly payments. When reimbursements from the federal government are factored in, the payments would put a roughly $550 million dent in the state’s checking account each month.
Lawyers for the state also argued that while the bill backlog is a problem, there wasn’t evidence to show that Medicaid patients had been denied care as a result.
Lefkow said she was bothered that “other people who are not as needy as these people are getting 100 percent” payment of their bills. Lefkow said she wasn’t in favor of depriving workers of their salaries or skipping pension payments, but said the state “has a real problem explaining” how some people are being paid while others are not.
Lefkow said it was “obvious” the state was failing to comply with her court order to pay the Medicaid bills. But she wanted evidence of harm that’s been caused to Medicaid patients as a result. She ordered the lawyers for the patients to submit affidavits documenting the damage.