Spending, Pensions and Medicaid
Thank you in advance for reading our final newsletter of a three part series focusing on the plan to stabilize our budget, revitalize our economy and implement historic spending reforms in Illinois. Before we conclude with our last section on Pension and Medicaid Reforms, I am pleased to announce that last week I was appointed chairman of the Appropriations II Committee. With this new role I am in a better position to help end the reckless spending habits of the past.
Right now we are implementing Budgeting for Results. This means we are no longer budgeting for cost and expense; we are going to better protect taxpayer dollars by budgeting for performance and results.
These reforms are part of a multi-layered plan to restore fiscal health to our state. The Pension and Medicaid systems in Illinois cost billions of dollars to fund each year. We have made significant progress, in a bi-partisan manner to adjust these systems, while still protecting the financial future and health of Illinoisans.
The Pension reform we passed into law saves Illinois $250 billion over 35 years. The legislation applies only to new employees hired after January 1, 2011 – not current employees or retirees. Current employees’ benefits are constitutionally protected.
Here are the hallmarks of the reform:
• Ends the lavish pensions for legislators and judges – Reduces the pension to 60% of the final average salary (not to exceed $106,800) as opposed to the current 85% of the last year’s salary.
• Ends the practice of “double dipping” - Suspends the annuity of any retiree hired after the effective date who returns to full-time employment in a position covered under any public pension system.
• Increases the retirement age to 67 – Reflects Social Security age requirements and is aligned closely with that of the private sector.
• Ends the 3% annual cost of living adjustment for (future) retirees – The new adjustment is based on one-half of the Consumer Price Index.
• Requires that a retiree’s benefit be calculated over the last 8 years of employment – Current employees’ retirement benefits are calculated by taking the average salary of the last 4 years of employment.
• Establishes a cap to the final average salary that mirrors Social Security – The final average salary is capped at $106,800 – meaning that even if a worker’s salary exceeds that amount, that retiree’s pensionable income is capped at $106,800.
After holding multiple hearings on Medicaid, legislation emerged that will save the state approximately $770 million in the next five years, with over $65 million in savings in Fiscal Year 2012 alone. Here is an explanation of the new law and the cost-saving reforms it puts into place:
This reform measure will cut Medicaid costs:
• The bill establishes a 2-year moratorium on program expansion.
• Moves more long-term care patients from institutional care to community care. Institutional care costs 3 times as much as community care.
• Sets new limits on ALL KIDS.
• Reforms pharmacy policies.
• Allows the State to more actively recover money lost to fraud.
This reform improves Efficiency and Care:
• It moves more long-term care patients out of big institutions and into small community homes, where they will have an enhanced quality of life.
• Requires at least 50% of Medicaid patients to have coordinated care by 2015. Coordinated care means patients have ONE doctor making decisions and someone keeping track of all the care they receive.
• Creates new computer systems to track Medicaid eligibility, enrollment, and re-enrollment and other new systems to streamline Medicaid processes and make the system more user-friendly.
• Allows more state agencies to share information to verify eligibility and enrollment.
This reform Fights Fraud:
• It requires one month of income verification to make sure only the truly needy can enroll in Medicaid.
• Eliminates automatic re-enrollment to require people to take more responsibility for their own medical care.
• Eliminates presumptive eligibility, except for pregnant women.
Our Pension and Medicaid systems have been a burden on Illinois taxpayers for decades. We had to enact these reforms to ease that burden and protect Illinois families. For more information on other fiscally responsible reform measures we are working to improve life in Illinois, log onto my website, www.senatorkotowski.com.
Thank you for your interest and involvement.
Senator Kotowski discussing Budgeting For Results