In bolder times, Illinois once dared to market itself to tourists as “The Happy State.” 

People may think whatever they like of the slogan. (Illinoisans at the time certainly had their own views,

especially when they learned their government was spending $10 million per year on it.) 

David VoepelBut the plain fact is that, in today’s Illinois, the notion of having any money to spend—let alone to spend on a cheery and chipper ad campaign—is so ridiculous that the state’s default slogan might as well be, “Abandon hope, all ye who enter here.”

In a kind of perverse first law of political thermodynamics, just as D.C. pulls itself out of its care quagmire, Illinois seems to be sinking.

Illinois providers that used to complain about the state’s criminally low Medicaid rates (consistently in the bottom five for at least a decade-and-a-half running) don’t know how lucky they were: Thanks to a peculiarly Illinoisan political crisis, providers’ Medicaid rates have gone from awful to nonexistent.

A Uniquely Illinois Crisis

As of this writing (early November), Illinois and Pennsylvania share the dubious distinction of being the last two states in the union without a budget. What gives Illinois top billing, though, is that at least Pennsylvania Gov. Tom Wolf, a Democrat, and his Republican foes in the statehouse have continued to negotiate even while their state languishes in financial limbo. In Illinois, Republican Gov. Bruce Rauner and the Democratic leaders in the General Assembly haven’t even spoken since May.

“It’s unprecedented,” says David Voepel, executive director of the Illinois Health Care Association. “The only services getting paid are those decreed by court consent decrees.”

Planning Impossible

Fair enough, except that there are nearly six dozen consent decrees, and about 10 of them are sucking up every available dollar, Voepel says.

“The comptroller claims by the end of the year the state will have $8.5 billion in unpaid bills, and nursing centers will be part of that mix,” he says.

Most providers in Illinois haven’t been paid since June. But even those who’ve planned well ahead for the collapse are hurting.

“It won’t cause me to close my doors, it won’t cause me to miss payroll. But it does mean that I can’t plan for what comes next,” says Thomas Annarella, administrator at Valley Hi Nursing and Rehab in Woodstock, a far, Northwest suburb of Chicago. “How do you plan for next year when you don’t know if there’s going to be a budget, whether you’re going to be paid?”

It’s not as though a budget will solve many problems, either. Both Rauner and Democrats in the General Assembly have promised to cut the state’s already abysmal Medicaid rates to help offset the state’s monstrous, and mounting, debts. The question is, by how much, and for how long?

“I know they’re going to cut the Medi­caid rate once they load the budget, because they told me that they were going to do that. But I don’t know what the cut is,” Annarella says.

“As an operator, all of these unknowns don’t allow me to put together a plan that goes beyond a year. It’s not necessarily a financial problem. It’s a planning problem. We’re becoming very reactive and not proactive. And that’s not a way to run a business.”

One sometimes hears intractable conflicts described as an irresistible force meeting an immovable object. That cliché works brilliantly for Illinois’ budget crisis.

The Irresistible Force

Rauner, a Harvard MBA who spent three decades as chairman of a Chicago private equity firm, forced his way into the Illinois governor’s race and ran as someone who was proudly foreign to Illinois’ cesspool politics (four of the last 10 governors have gone to prison for corruption: “Illinois: Where the governor will make your license plate for you,” natives like to say, ruefully). He campaigned as someone who could cut the fat from the state’s budget but also face up to what he continues to call its “structural problems.”

He defeated the Democrat incumbent, winning every county but Chicago’s Cook County, and was instantly recognized as someone who could not only save Illinois from itself but also just possibly breathe some life into Illinois’ ramshackle Republican party (the Land of Lincoln had in recent years witnessed the utter collapse of the Party of Lincoln under a tawdry heap of corruption and sex scandals. And Alan Keyes).

But Rauner got off to a rough start when he hired Donna Arduin, a $30,000-per-month political consultant who had advised then-California Gov. Arnold Schwarzenegger and a host of other conservative leaders. Whatever one’s opinions about Arduin’s politics, or her results, for many Illinoisans, her presence on Rauner’s staff was the equivalent of sending a gunslinger to meet the sheepherders.

For Illinois’ providers—desperately looking for someone, anyone, in state government with whom they could communicate constructively—things were made even more sticky by the fact that one of Rauner’s opponents tried to tie Rauner (through his investment company) to a Florida nursing center where residents had died horribly.

The worry was that Rauner, angered by the accusations, wouldn’t care to be seen as doing any favors for his state’s providers.

The Immovable Object

If the harshest critic cared to accuse Rauner of being naïve, the mildest critic wouldn’t hesitate to laugh in the face of anyone who said that about Rauner’s principal opponent, Illinois House Speaker Michael Madigan.

Madigan, who came to power when doctors still sold cigarettes on television and the United States still relied on the gold standard, is the last Praetorian of Richard J. Daley’s once-mighty empire. He is also, as it happens, the stepfather of Illinois’ attorney general, Lisa, who is widely seen—at least by Democrats—as the state’s governor-in-waiting.

More than one wag has suggested that “Mike” Madigan has absolutely nothing to lose, and everything to gain, by letting the scenery collapse around Rauner, and allowing Lisa Madigan to become his last gift to the good people of his state.

Yet even if one dismisses the dynastic reading of Madigan’s saga, the unions in deeply blue Illinois see Rauner as an existential threat and—given what has already happened in Wisconsin and Michigan—no Daley Democrat worth his salt can possibly allow Rauner’s “structural reforms” to become law.

Dispatches From A Banana Republic

Perhaps unsurprisingly, the dispatches from Illinois since the budget collapse have read like those from a sweltering, banana republic. The secretary of state has announced that he’ll no longer mail out drivers’ license renewal reminders because he can’t afford the postage. The statehouse lights have been switched off.

This might all be in good fun if there was a chance that a budget compromise might get the good times rolling again. But, even before the budget collapse, Illinois had become more like medieval Nottingham than a modern, wealthy state.

Earlier this year, the George Mason University’s Mercatus Center ranked Illinois dead last among the 50 states for fiscal health. “High deficits and debt obligations in the forms of unfunded pensions and health care benefits continue to drive each state into fiscal peril,” study author Eileen Norcross wrote. “Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities—constituting a significant risk to taxpayers in both the short and the long term.”

If all of that seems bad, for Illinois’ providers, it’s even worse.

Mind The Medicaid Gap

Even before the budget crisis, Illinois’ Medicaid shortfall—the difference between what it costs to provide care and what the state actually pays for the care—was nearly $580 million per year, according to an analysis by research firm Eljay commissioned by the American Health Care Association. That’s an operating loss of about $35 per bed, per day.

It is guaranteed to get worse. One of the few areas where Rauner and Madigan agree is that Illinois’ education system needs more money. They also agree that Medicaid ought to pay for it.
And that’s without even mentioning tort reform.

According to a November analysis by risk-management firm Aon, Illinois ranks No. 3 for the number of claims filed against providers, with more than two lawsuits filed per every 100 occupied beds.
With the average liability cost hovering around $150,000 per case, an Illinois provider can expect lawsuits alone to create losses of about $8 per bed, per day, Aon says.

Illinois providers have to wonder whether they’re living in a failed state.

‘The Point Of No Return’

“The longer the state goes without a budget, the more likely there is going to be a downgrading of the state’s bond rating,” Valley Hi’s Annarella says. “The longer you go without a budget, the more the bills stack up. All this means is that, once you do get a budget, the cuts are going to be steeper and steeper.”
As if to underline Annarella’s point, one of Illinois’ only Medicaid managed care providers has recently announced that it’s pulling up stakes. Whatever else that means, it means that those providers that have negotiated managed care contracts for their residents are now going to have to send those residents back on the state’s overburdened, underpaying Medicaid rolls.

“At what point do they reach the point of no return—when they can’t come back from these self-inflicted wounds?” Annarella asks of his state’s leaders. “I’m worried about the day when they won’t be able to make their obligations, even with drastic cuts. They can’t declare bankruptcy, but if you don’t have the money, you don’t have the money.”

Like everyone else in the state, Illinois’ providers are watching, and waiting. The task is enormous and the prospects are grim, but who ever said Illinois was a happy state?

“We are working hard” to make sure the damage to long term care and the intellectual and developmental disability community “is minimal,” the Illinois Health Care Association’s  Voepel says, “but it is a very desperate situation.”