LITTLE ROCK — The projected shortfall in the state Medicaid program for the next fiscal year is now estimated at $61 million, down $77 million from the most recent estimate, Gov. Mike Beebe and state Department of Human Services agencies said Thursday.

The improved financial outlook for the program means that a proposed elimination of funding for Level 3 nursing home care, or care for people who need limited assistance with daily activities, will not be necessary, according to DHS. The cut could have affected up to 15,000 Arkansans.

"No one wanted to cut funding for nursing care, so I think this will be very welcome news," DHS Director John Selig said in a statement issued by the agency. "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."

Also no longer necessary, according to the agency, are proposals to eliminate funding for Medicaid’s adult dental program and an insurance program for low-income workers and to limit community-based services for the elderly to the current participants.

The revised projection assumes that lawmakers will approve Beebe’s proposal to boost the Medicaid program with $90 million in general revenue and $70 million in one-time surplus funds in the fiscal year that begins July 1, and with $222 million in general revenue and $70 million in surplus funds the following year.

DHS said the revised outlook does not eliminate the need for proposals to skip one year’s inflationary increase in Medicaid reimbursements paid to health care institutions and reduce reimbursements to other health care providers to 3 percent below what they would otherwise be. Officials hope those cuts, plus various efficiency measures, will close the $61 million gap.

Beebe said in his Jan. 15 state-of-the-state address that the projected shortfall had shrunk, though at the time he declined to disclose the new projection.

Selig said Thursday that growth in the program is the lowest it has been in 25 years and that per-capita spending on every category of Medicaid beneficiaries has fallen. He and Beebe attributed the trend to the Arkansas Health Care Payment Improvement Initiative, the governor’s effort to move the state from a fee-for-services system to one in which health care providers are paid for episodes of care and rewarded for efficiency and healthy outcomes.

"This historically slow Medicaid growth and smaller shortfall show that our providers are stepping up to work with our payment improvement initiative," Beebe said in the release. "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, said Thursday the revised projection was "a positive thing."

"It’s another material piece of data that kind of keeps rolling off the line that we’re getting as the session moves on. To me, I guess it means that it’s less money we have to worry about funding short-term. My mind immediately goes to current budget and how we’re going to budget all of the other areas that we have to, knowing that number’s a lot less," Carter said.

One of the key issues of the current session is whether the state should expand Medicaid under an optional provision of the federal Affordable Care Act to include people earning up to 138 percent of the poverty level. Beebe supports the expansion, which would be fully funded by the federal government in the beginning and would be 90 percent funded by the federal government starting in 2020. The Republican leaders of the House and Senate have said they are not inclined to support the expansion.

Prior to his state-of-the-state address, Beebe had said that cutting Level 3 nursing home care would be necessary without the expansion.

Carter was asked Thursday if the lowered shortfall estimate had changed his attitude toward expanding Medicaid.

"No, in a strict sense" he said. "Sure, we’re going to consider all of these things, but it’s about long term, this is not about getting … flat growth over six months. You add 250,000 people and you have to pay 10 percent of that, at best, going forward, and you think about what happens if those rules change. You have to think about all that stuff."

Senate President Pro Tem Michael Lamoureux, R-Russellville, called the revised estimate "good news" but said it did not change his thinking on Medicaid expansion.

"I don’t think the fact that they were wrong about the amount of shortfall improves or decreases the strength of the argument about expansion," he said.

Beebe spokesman Matt DeCample said the revised shortfall projection is not necessarily part of the expansion debate because expansion offers its own set of positives for the state, but he added that it "certainly doesn’t hurt the argument" for expansion.