Fy11 Supplemental Budget Plan as of 0701112

8/6/2019 Fy11 Supplemental Budget Plan as of 0701112

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FY 2011Government of the District of Columbia

Vincent C. Gray, Mayor

Allen Lew, City Administrator

Eric Goulet, Deputy Chief of Staff and Budget Director

PROPOSED SUPPLEMENTALBUDGET PLAN

July 1, 2011


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The following tables summarize the Mayors supplemental budget proposal:

(in millions)

New Revenue/Spending Savings

Increase in revenue projected by OCFO on June 22, 2011 107.1

Revenue Increase: H Street Streetscape No-Interest LoanProgram 0.7

Revenue Decrease: DC Office on Aging (9.0)

Revenue Decrease: FY 2010 Fund Balance Shortfall (10.8)

Cost Savings: District of Columbia Public SchoolsUnderspending 0.9

Cost Savings: Remaining Balance in Operating Cash Reserve 3.2

Total revenue and savings 92.1

Spending Pressures

Base Retention Differential, Fringe, and EmergencyReimbursement (MPD) 7.7

Increased Pharmaceuticals (DOC) 0.7

Correctional Treatment Facility Revenue Decrease (DOC) 5.6

Healthcare Alliance Transfer Shortfall (DHCF) 6.5

Missed Savings Initiatives (DHCF) 6.9

Stevie Sellows Collections (DHCF) 3.7

Fee-for-Service Spending Growth (DHCF) 2.0

MCO Case Settlement (DHCF) 1.1

MCO Contract Rate Increase (DHCF) 6.0

H Street Streetscape No-Interest Loan Program (DSLBD) 0.7Increased Commitments (DYRS) 8.4

Increased Ticket Processing (DMV) 1.5

School Nurses (DHCF through the Operating Cash Reserve) 8.5

Total spending pressures 59.3

New Non-Lapsing Funds for FY 2011

MCO Contracts Rate Increase (DHCF) 6.0

School Nurses Funding (DOH) 12.5

New Sworn Police Officers (MPD) 10.8Dixon Case Settlement (DMH) 3.5

Total new non-lapsing funds 32.8

Total spending pressures and new non-lapsing funds 92.1

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The following table summarizes the spending increases included in the Mayors gap

closing plan:

Agency Name

LocalFundsSpendingIncrease

TotalSpendin

g

CS0-Cash Reserve 8,500,0008,500,000

EN0-Department of Small and Local BusinessDevelopment 723,000 723,000

FA0-Metropolitan Police Department18,500,00

018,500,00

0

FL0-Department of Corrections 6,300,0006,300,000

HC0-Department of Health12,500,00

012,500,00

0

HT0-Department of Health Care Finance32,200,00

032,200,00

0

JZ0-Department of Youth Rehabilitation Services 8,400,0008,400,000

KV0-Department of Motor Vehicles 1,500,0001,500,000

RM0-Department of Mental Health 3,500,0003,500,000

92,123,0

0092,123,0

00

* As a technical adjustment, based upon the OCFOs revised revenue estimates on June 21,2011, the Dedicated Taxes funding has increased by $XXX. This value will be incorporatedin the Supplemental Budget submission to the Council.

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Agency Supplemental Budget Initiatives

Cash Reserve (CS0)Proposed FY 2011 Supplemental Budget Narrative

Supplemental Budget Initiatives:

$8.5M School Nurses Funding: As part ofthe FY 2011 Proposed SupplementalBudget plan, the Mayor will place $8.5M in the Operating Cash Reserve. Federalregulations require the District to set aside funds to account for potentialdisallowances for DSH allocations. This funding will be allocated towards theDepartment of Health Care Finance (DHCF) to cover disallowances associated withthe funding of school nurses with DSH upon the final determination by CMS.

Department of Small and Local Business Development (EN0)Proposed FY 2011 Supplemental Budget Narrative


$0.7M H Street Streetscape No-Interest Loan Program : As part of theDecember FY 2011 gap-closing budget, the Council placed $723,000 of revenue intoa fund for Streetscape construction relief. As a result of the H Street constructionand rehabilitation project, the Council set aside this funding so that the Mayor maymake interest-free loans to any individual or entity that operates a retail businessinside or adjoining the H Street construction and rehabilitation zone. Originally, thiswas proposed as a tax abatement program that resulted in a reduction of revenue

of $723,000. The Council changed the method of funding for this program from atax abatement to a loan program during the second reading of the Budget SupportAct, after the Budget Request Act was already passed. Thusly, there was no budgetauthority within the Budget Request Act for DSLBD to spend this $723,000 and thisaction is necessary to correct provide the appropriate budget authority.

Metropolitan Police Department (FA0)Proposed FY 2011 Supplemental Budget Narrative


$7.7M - Base Retention Differential, Fringe, and EmergencyReimbursement: The $7.7M of personnel service (PS)deficits of the MetropolitanPolice Department (MPD) are driven in part by overspending in PS related to thebase retention differential (BRD) pay for 1,689 sworn officers. The FY 2011 budgetdid not include funding for BRD. There is also a shortfall in the Emergency PlanningSecurity Fund (EPSF) reimbursements. When the FY 2011 budget was developed,the amount of reimbursable EPSF expenses were overestimated resulting in a

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spending pressure which needs to be addressed. Lastly, there is a shortfall in thefringe benefits budget. The FY 2011 budget was developed using a fringe rate of12.56%. Currently, the average fringe rate is between 14%-15%. These overallspending pressures are offset by agency under spending of $1.3M in regular pay.

$10.8M - New Sworn Police Officers: Additionally, $10.8M has been added as

budget authority within MPD in order to fund new sworn officers. This $10.8M shallbe available during FY 2011 and allowed to be classified as carryover funds, whichshall remain available until expended in FY 2012.

Department of Corrections (FL0)Proposed FY 2011 Supplemental Budget Narrative


The Department of Corrections (DOC) $6.3M spending pressure is due to a shortfall

in special purpose revenue and the current trends in contract costs exceeding thebudgeted amount. In May 2011, the DOC received $1.4M from the citys OperatingCash Reserves which has lowered the pressure to $6.3M.

$5.6M - CCA/Housing Contract: The U.S. Marshal Service has increasedefficiencies and revenue collection has fallen to a rate where only $19.0M isexpected to be collected versus $24.6M which was initially estimated. This createsa shortfall of $5.6M. This shortfall was not included in the low estimate for the DOCspending pressure; however, the Correctional Treatment Facility (CTF) populationand revenue trends indicate that this shortfall will remain. The agency began to seea sharp increase in the population at the CTF at the end of the second quarter whichhas remained consistent and continues to grow. Special Purpose Revenue is

derived from a per diem fee for the housing of Federal prisoners charged to the USMarshal Service. This revenue source is used to support local prisoner housing atthe CTF, which is contractually provided at a fixed rate for a maximum of 965 beds.

$0.7M Pharmaceuticals: The department budgeted $2.0M for pharmaceuticals;however based on current usage, it is expected that the total cost ofpharmaceuticals will be $4.0M. In May 2011, DOC received $1.4M from the citysOperating Cash Reserve of which $1.3M has been applied to pharmaceuticals. Assuch, the remaining pressure is $0.7M

Department of Health (HC0)Proposed FY 2011 Supplemental Budget Narrative


The proposed FY 2011 supplemental budget covers $12.5M in spending pressuresrelated to Disproportionate Share (DSH).

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$12.5M Childrens Disproportionate Share (DSH) Problem: Federal rulesrequire that DSH payments to hospitals do not exceed their specific DSH limits orcaps, which are based on the amount of uncompensated care the hospitals provide.Childrens hospital currently receives nearly $20M in hospital-based DSH payments.Of this amount, $12.5 is allocated to the hospital but for the purpose of funding theDOH school nurse program. Like the DSH funds used to pay for the Districts

expansion of Medicaid eligibility, these dollars are taken off of the top of DCs total$81M DSH allocation. The remaining DSH funds are distributed by formula to the allof the hospitals in the area based on relative differences in the amount ofuncompensated care each hospital provides. Childrens agreed to participate in thisarrangement as a favor to the District and the $12.5M is really a pass through toDOH to fund the school nurse program. At the time this decision was made, it wasmistakenly assumed that the allocation of the $12.5M would not count against thehospitals DSH limit because it was not allotted as a part of the Districts formula.Moreover, federal rules have further narrowed the definition of uncompensated caremaking it increasingly likely that Childrens now receives more DSH funds than canbe justified by the level of uncompensated care it provides. Since that time thefollowing has transpired:

Indications from DSH audits of FYs 2005, 2006, and 2007 are thatChildrens does not provide enough uncompensated care to justify such alarge DSH payment.

CMS has said there will be no financial ramifications of the DSH auditsthrough FY 2010. However, there will be financial consequences of the auditsfor FY 2011 and onward.

The Department of Health Care Finance (DHCF) has requestedhospitals to update reports on the amount of uncompensated care providedusing the most recent data possible which is FY2010 and will use thesereports to redistribute DSH payments for FY2012. Childrens is concerned

that these data will validate the previous audits by showing that it does nothave the necessary level of uncompensated care to support its allocation.

As the $12.5M were passed through to DOH and not used by Childrensto defray the cost to its uncompensated care, hospital administrators haveindicated that they are not responsible for any potential CMS disallowanceassociated with this specific part of its DSH allocation.

Department of Health Care Finance (HT0)Proposed FY 2011 Supplemental Budget Narrative


The Department ofHealth Care Finance total budget pressure for FY2011 =$32.2M

$6.5M Childless Adults under 200% of the Federal Poverty Level: As aresult of federal health care reform, DC Medicaid now covers childless adults up to200% of the federal poverty level (FPL). The first change to the State Plan was forchildless adults with incomes from 0% to 133% FPL and was effective July 1, 2010.

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On December 1, 2010, coverage for childless adults with incomes from 133% to200% FPL was approved and funded through a waiver program using a portion ofthe Districts DSH allocation.

There are 3 reasons for the $6.5M pressure.

1. Fewer people transitioned from Alliance to Medicaid than budgetedresulting in an overestimation of local savings.2. The program for the 133% - 200% FPL group started 2 months laterthan budgeted thus delaying local savings.3. There are more total childless adults under 200% FPL than budgeted --approximately 63,000 versus the approximately 59,000 budgeted resultingin increased local spending.

$6.9M Delays in Budgeted Savings Initiatives:The previousadministration submitted a FY2011 budget that included planned reductionsto various provider payments. DHCF staffs were required to submit StatePlan Amendments (SPA) to CMS for approval of the planned reductions.

However, during much of 2010, the agency labored under a 40 percentvacancy rate and the work on getting plan approval for the SPAs wassignificantly delayed. These delays resulted in the reported $6.9M spendingpressure. The specific SPAs that were impacted are:

Elimination of nursing home inflation increase delayed from October 1,2010 to January 1, 2011.

Reduction in physician rates delayed from October 1, 2010 to January1, 2011.

Reduction of inpatient hospital rates delayed from October 1, 2010 toJune 1, 2011 [This SPA had to be delayed until a previously submitted SPA

requesting an increase in inpatient rates was approved]. Reduction in rates for providers of service to beneficiaries enrolled inthe waiver for persons with developmental disabilities delayed from October1, 2010 to October 1, 2011.

Reduction in dental rates delayed from April 1, 2011 to July 1, 2011.

$3.7M Problems with Stevie Sellows Fund Tax Collections

This dedicated tax revenue comes from a provider tax on ICF/MRs.

Nearly all the providers have appealed this tax to the Office ofAdministrative Hearings.

The providers have contacted CMS in an effort to have this provider tax

disqualified as local match for Medicaid spending. Most of the providers have refused to pay the tax.

DHCF is in settlement negotiations with the providers and appears tobe working towards a solution that will be favorable for the District. However,at this time, the issue remains unresolved.

$2.0M Unexpected Fee-For-Service Spending Growth: Spending inthe fee-for-service program is greater than expected for some provider-types.

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Most notably, the cost of the Medicaid Personal Care benefit is growing by 25percent each year. The effect of this growth would have been greater thanreported but was offset by under spending in other provider categories.

Therefore, the net effect is $2M beyond the budget.

$1.1M Settlement with Chartered Health Plan on Dental Rates: In 2008,

afterthe MCO rates for the contract year had been set, DC Medicaid required theMCOs to pay for dental care at the rates used by the departments fee-for-serviceprogram. MCOs were given a new rate schedule and prohibited from negotiatinglower rates with the providers an explicit violation of their contracts with the District.Chartered Health Plan filed an appeal with the Contracts Appeals Board claiming theDistricts actions led to the MCOs losing money on the dental care provided. Sincethat time the following has occurred:

Chartered claimed its losses related to this action totaled $20M.

DHCF leadership requested information in support of the claim whichwas later provided to the agencys actuary, Mercer Consulting, to evaluate.

Mercer evaluated the data and concluded that DHCFs exposure was$10M.

DHCF agreed to settle this case for $3.7M gross ($1.1M local) in FY 2011,plus a $1.00 add-on to Chartered s rate in an upcoming contract ($6.3M gross,$1.89M local for FY12).

The settlement was structured this way to limit the pressure in FY 2011.Also, by incorporating the largest portion of the settlement in Chartereds ratefor the upcoming year, the likelihood that CMS will participate in the settlementis increased since the payout will be a part of the capitated rate in the MCOcontract. This aspect of the settlement is not widely publicized so as to avoidCMS push back.

$6.0M Unstable Managed Care Organization (MCO) Rates: CMSrequires actuarially sound rates for Medicaid MCOs. Rates for the next MCOcontract year start August 1, 2011 which incorporates two months of thecurrent 2011 fiscal year. The newly proposed rates:

Are actuarially sound for both Medicaid and Alliance.

Include a 2% performance incentive based on quality and efficiencymeasures.

Include an increase for Chartered Health Plan as part of settling anappeal before the Contracts Appeals Board concerning dental rates (seedetails on last page).

These new actuarially sound rates which were set in June 2011 are higherthan the assumed rates in the FY2011 budget which are based on lowerMedicaid and Alliance rates. Thus the impact of the proposed new rates forthe months of August and September is $6M more than budgeted for in FY2011.

$6.0M Unstable Managed Care Organization (MCO) Rates: Basedupon the increased rates

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Department of Youth and Rehabilitation Services (JZ0)Proposed FY 2011 Supplemental Budget Narrative


$8.4M Increased Commitments: DYRS is projecting an $8.4M shortfall as aresult of an increase in youth placements for the Committed Services Program. Thebudget for FY 2011 was formulated to support a committed youth population of 820youth. To date, the average committed population is 1,028 youth, with a total FY2011 projected increase to 1,052. In addition, DYRS projects that all direct carefunding will be exhausted by the end of the 3rd quarter. The actions taken in thisSupplemental Budget Plan address these spending pressures.

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Department of Motor Vehicles (KV0)Proposed FY 2011 Supplemental Budget Narrative


$1.5M Increased Ticket Processing: The proposed FY 2011 supplementalbudget covers $1.5M of increased costs above the budget to accommodateunforeseen increased ticket processing in the first two quarters of this fiscal year.When D.C. residents fail to pay tickets, the DMV procures the services of collectionagencies. These agencies secure revenue for the District, but charge a fee to theDMV.

Department of Mental Health (RM0)Proposed FY 2011 Supplemental Budget Narrative


$3.5M Dixon Case Settlement: The proposed FY 2011 supplemental budgetcovers $3.5M of costs necessary to help get the District out from court monitoringfrom the Dixon case.

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Fy11 Supplemental Budget Plan as of 0701112

Documents

Transcript of Fy11 Supplemental Budget Plan as of 0701112