A $138 million funding gap in the state’s Medicaid program has shrunk to $61 million, according to state officials.

Gov. Mike Beebe and the Arkansas Department of Human Services disclosed the improved financial scenario just one day before an expected damaging audit is released on the state Medicaid program.

DHS director John Selig said the improved budget situation meant potential cuts to Level 3 nursing home care and three other programs would be averted.

DHS said the ARHealthNetworks, Medicaid’s adult dental program and community-based services for the elderly would also be spared by the budget improvement.

“No one wanted to cut funding for nursing care so I think this will be very welcome news,” Selig said. “Medicaid staff have worked hard to manage the program tightly and to be as innovative as possible. The new estimates, down from $138 million, show their work is paying off.”

State officials are still planning to use as much $70 million in budget surplus to shore up funding for Medicaid.

Selig cited slower growth in the Medicaid program for the improved budget picture as well as reforms of the Arkansas Health Care Payment Improvement Initiative, which has been an administration effort to bend the cost curve in the low-income health care program.

“This historically slow Medicaid growth and smaller shortfall show that our providers are stepping up to work with our payment-improvement initiative,” Beebe said. “Many of them are providing high-quality care with good patient outcomes while adopting more cost-effective practices. While the initiative only includes a handful of disciplines so far, other providers are getting ahead of the game and adopting a similar philosophy that benefits both our patients and our state budget.”

House Speaker Davy Carter (R-Cabot) mentioned the new figures in his daily press briefing. He said the improvement was “welcome news” and would help with shaping the budget for the next biennium.

Carter said the change in projections does not necessarily change the debate on Medicaid expansion. He said more of that discussion would center on long-term improvements to the program.

As for Friday’s expected audit report, Carter said he wanted to wait and read the report and hear from DHS officials about their concerns. If rumors that massive waste or fraud is uncovered, Carter said it could alter the debate on expansion.

He emphasized that there is “a perception that there is waste and fraud in Medicaid” and he hoped the report would shed light on the subject.