June 6, 2017 / 7:36 PM / 3 months ago

Possible ruling soon on Illinois Medicaid payment priority

CHICAGO (Reuters) - A U.S. judge could determine as soon as Tuesday whether Illinois' obligation to make payments to Medicaid providers under a federal consent decree takes precedence over state-mandated payments for debt service, pensions and other priorities.

Judge Joan Lefkow said she will rule on a motion by healthcare advocates concerned that Illinois' ongoing budget impasse and its resulting backlog of nearly $14.7 billion in unpaid bills is harming Medicaid recipients' access to medical care.

David Chizewer, a lawyer representing the recipients, told Lefkow earlier on Tuesday that a court determination giving precedence to Medicaid payments could lead to a compromise with the state over the next few days. Otherwise, the plaintiffs are asking the court to begin contempt proceedings against the nation's fifth-largest state.

Illinois officials have warned that an increase in priority payments could push the cash-strapped state to the point where court-mandated spending could exceed available revenue. [nL1N1IY2GV]

Each month, priority payments of $1.85 billion are allocated to schools, local governments, payroll, bonds and consent decrees, consuming 90 percent of Illinois' monthly revenue, according to a court document filed by the state.

Both sides told Lefkow on Tuesday that they failed to reach a compromise on speeding money to managed-care organizations participating in the Medicaid program, which provides health services to 3 million poor and disabled Illinois residents.

The plaintiffs are from cases dating back to 1992 and that resulted in federal consent decrees requiring the state to continue to make Medicaid payments despite its budget problems.

Illinois is limping toward the June 30 end of a second-straight fiscal year without a complete spending plan due to a political stalemate between its Republican governor and Democrats who control the legislature.

Lawmakers ended their spring session last week without a fiscal 2018 budget deal, triggering downgrades that pushed Illinois' credit ratings from S&P and Moody's Investors Service to a step above junk. [nL1N1IY1R2]

Brent Stratton, an assistant Illinois attorney general, said the issue is not that the state is unwilling to pay Medicaid providers, but that it is unable to pay them promptly.

He told the judge that missing "high priority" payments on Illinois' roughly $30 billion of general obligation bonds would result in a default, while skipping payments to public school districts could force some to shut down.

S&P has warned that Illinois' budget crisis could lead to bond payments being squeezed out by other spending priorities.

Editing by Matthew Lewis

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