Spending on Medicaid is likely to make up close to half of Louisiana’s total state operating budget in the next fiscal cycle, though most of the money will come from the federal government and not state tax dollars.
The Medicaid program is expected to cost the state around $13.4 billion in the fiscal year that begins July 1 — approximately 50 percent of the $28.6 billion state budget proposal Gov. John Bel Edwards‘ administration has outlined.
Louisiana’s Medicaid funding has increased significantly since Edwards expanded Medicaid coverage through the Affordable Care Act last year. Federal funding for the Louisiana Department of Health went from $5.9 billion in the last budget cycle to $8.3 billion in the current state budget, mostly because of Medicaid expansion. It is expected to go up to $10.1 billion in the next budget cycle, again primarily because of Medicaid expansion, according to the Louisiana House budget staff.
In total, around 74 percent of Louisiana’s Medicaid program is funded with federal dollars. This means that reducing the Medicaid program doesn’t necessarily produce savings that could be shifted to other state priorities such as higher education, the TOPS scholarship program or road construction.
If Louisiana does cut state dollars from the Medicaid program, it results in a loss of much more of the federal “match,” making legislators reluctant to reduce local Medicaid spending.
And like health care costs elsewhere, it doesn’t seem Medicaid program expenses are slowing down.
“Medicaid does nothing but grow,” said Jeff Reynolds, deputy secretary of the Louisiana Department of Health, during a budget hearing Wednesday (April 5).
“We can’t control our costs. We’re growing out of control,” said state Rep. John Schroder, R-Covington, at the same budget hearing.
Here’s some more facts that could shed light on why Medicaid costs so much money in Louisiana.
Medicaid covers 60% of Louisiana children
A majority of Louisiana’s children, 60 percent, get health insurance coverage through Medicaid. This coverage lasts until they are 19 years old — or 26 for children in the foster care system.
Almost all of the money — 97 percent — used for the Medicaid coverage of children comes from the federal government. Children who are part of households with more money also qualify for the coverage. For example, able-bodied adults can only access Medicaid if they are living an household with an income at 138 percent of the poverty line. Children can be covered under Medicaid if they are in a household at 250 percent of the poverty line.
Federal government compensates states differently
As mentioned above, the federal government doesn’t compensate all Medicaid enrollees the same. Congress provides 97 percent of the money for children in the program.
It provides 95 percent of money for all people newly enrolled in Medicaid under the expansion implemented under the governor, though that’s supposed to drop to around 90 percent by 2020. Adults living in households with income of $33,000 per year for a family of four now qualify for Medicaid, but didn’t before the expansion.
But the federal government only covers about 64 percent of the funding for people in the Medicaid program who would have been covered before Edwards’ expansion. This includes people with disabilities and women who are pregnant.
Louisiana under U.S. per capita average in Medicaid spending
Though Louisiana has a large number of people enrolled in Medicaid, it spent less than the U.S. average on Medicaid per capita last year, according to the Louisiana House budget office.
Louisiana spent about $401 in state tax dollars per resident on Medicaid last year. The U.S. average was $490. Louisiana did spent more than Alabama and Mississippi — which spent between $100 and $300 per capita — but less than Texas, which spent close to $490.
State Medicaid spending hasn’t grown as fast in Louisiana
Between 1991 and 2016, the amount of Louisiana tax dollars spent on Medicaid actually grew less than the U.S. average during that time. Louisiana is spending about 6.7 percent more state tax dollars on Medicaid, while the U.S. average is about 7 percent, according to the Louisiana House budget office.
Hospitals: Medicaid expansion hurts because payments are too low
There are gripes from providers about Medicaid expansion. Some hospitals say they are losing money because more people with Medicaid coverage are now seeking treatment, and Medicaid doesn’t reimburse the hospital enough to cover their costs, according to the Louisiana Department of Health.
The governor and legislators set the rate at which Medicaid providers are reimbursed. It has been set rather low, in order to save money in the budget, which contributes to why hospitals are losing money on Medicaid patients.
Some hospitals reimbursed more for treating Medicaid patients
It should be said that not all hospitals are reimbursed the same for Medicaid patients, which can cause some infighting between the institutions. University Medical Center — and other hospitals that specifically provide services for the poor and uninsured — received more compensation from the state for treating Medicaid patients. This also goes for rural hospitals, which receive supplemental funding to treat patients assumed not to have much means.
But those deals are not extended to hospitals that don’t fall into those camps, which makes its more expensive for them to treat Medicaid patients. The Louisiana Department of Health said it is studying a system under which the compensation would “follow the patient” — instead of going to specific institutions where they assume those with Medicaid will show up when they are sick.