The state's pension debt isn't the only existing outlay driving the state's finances into the ground. Illinois also faces a huge backlog of payments to hospitals, nursing homes, pharmacies, and physicians that treat patients on public aid. For years, state lawmakers have neglected these costs, choosing to delay reimbursements and use the revenue to fund other services. Last December, the total debt stood at $3.4 billion. The state received a $1.4 billion loan at the beginning of the year, which was a helpful boost but only eased the pain in the short-term. Doctors still have to wait anywhere from one month to one year to be compensated for treating state-subsidized patients. As a result, many simply choose not to treat them. In turn, discouraged families opt not to sign up for programs that they are eligible for. Overall, the ripple effect is bad for the state's bottom line and its public health.

The stimulus plan was supposed to help solve the problem. A provision in the final stimulus bill, which provided the state with $3 billion in Medicaid funds, made the assistance contingent on the state's ability to promptly reimburse providers. Illinois is largely keeping up its side of the bargain; hospitals, nursing homes, and physicians are now receiving Medicaid payments within 30 days. But to make the full payment, and keep the matching funds, pharmacists and smaller medical providers -- who constitute about one-third of the Illinois Department of Healthcare and Family Services' budget -- are bearing the brunt. Illinois Issues' Bethany Jaeger explains in a comprehensive article on the topic:

In July, the General Assembly cobbled together a budget that not only borrowed from lending institutions to pay public employee pension obligations, but it also approved borrowing from state agencies and state contractors by sweeping money from dedicated funds and freezing payments to state vendors.

The delay will particularly affect Medicaid providers that don’t leverage extra federal reimbursements through the American Recovery and Reinvestment Act, better known as the federal stimulus package. Pharmacists are among the largest group expected to experience delays as long as 150 days by the end of the fiscal year, June 30, 2010. Others include home health aides for seniors, emergency and nonemergency transportation services and medical equipment providers.

The problem will get worse before it gets better. Because employers are dropping coverage and more people are losing their jobs entirely, enrollment in Medicaid programs grew by an average of 5.4 percent in the previous fiscal year, according to a new report by the Kaiser Family Foundation. That will only drive up state's medical costs. State law also mandates the governor to repay short-term debt and prioritize payments for education, income-based aid, and social services, including child care, before Medicaid. "It’s going to be very challenging in the latter half of fiscal year '10," Rick Cornell, Illinois' assistant comptroller for fiscal policy, told Jaeger. "We're just going to have to struggle through this in the short term until there are new developments."

Those new developments could be some legislative proposals initiated by Sen. Jeff Schoenberg (D-Evanston), one which would establish a revolving loan fund to free up credit. But the ultimate development would be fundamental tax reform. Like so many of our state's fiscal problems, the inability to pay reimbursements is directly related to the Assembly's unwillingness to fix the state's tax structure. Until sustainable revenue is coming in, these debts will continue to hang over our heads.

Read Jaeger's entire piece here.

Image used under a Creative Commons license by Flickr user dmason.