Rather than trepidation, the most health-vulnerable Louisianans should feel elation that the Republican Congress is talking about changing Medicaid reimbursement rules for states.
As part of federal government right-sizing discussions, the House of Representatives GOP majority has set as a goal a reduction of $880 billion over the next decades in costs that include Medicaid. Even factoring out non-Medicaid expenditures and well as waste reduction – and anybody who has worked through the Medicaid-financed system knows there is a formidable amount of it – the total dollar amount the federal government would have to spend on Medicaid would have to decrease to meet this goal.
In tandem, the majority has discussed making Medicaid subject to block grants. This would give states greater latitude over how funds designated for Medicaid could be spent in fulfilling its purposes, allowing them to better target highly-needy individuals rather than disproportionate spending on those less so or in no real need.
One very obvious change would be, as was known a dozen years ago must happen eventually, to end the sweetener to suck in states to expansion. For the regular abled adult population, until the (misnamed) Affordable Care Act came along, annually the federal government sets a reimbursement figure known as the FMAP for most Medicaid recipients. Traditionally, Louisiana’s has been among the most generous, for 2025 at just above 68 percent, meaning the state paid for less than a third of care for indigent individuals that make 0 to 25 percent of the federal poverty level for the year (for a single person, $15,650).
But when the Supreme Court ruled expansion – designed to cover abled adults from the 25 to 100 percent range of the FPL (technically, 138 percent but as the subsidized insurance marketplace included anybody above 100 percent almost all would choose the marketplace because of its flexibility) – was optional for states, the 90 percent match for that range under expansion became a disingenuous and perverse incentive. Think about it: states would receive more money to pay for insurance for those more able to pay for it on their own, and more than for their lowest income abled adults, children, and even for their least healthy special needs populations. This highlights the hypocrisy of the political left behind the ACA, whose intent with this rate structure was less about pretending to improve health care access than it was to suck in a much larger Medicaid population that required much larger financial commitments to grow government and foster dependency among them to make it politically difficult to reduce the entitlement in any way.
And now that time has come. Were the federal government to cut back the expansion FMAP to the regular level, for Louisiana that would mean – as according to its most recently available annual data state taxpayers had to fork over nearly $500 million for the 10 percent match – an increase of the state burden to $1.583 billion, or $1.088 billion higher – that increase just about the cost the state pays for its entire menu of waiver programs designed to attend to the needs of its moderately-to-severely disabled citizens. This change would argue solidly for scrapping expansion.
Which would not have a significant impact on the population losing this taxpayer-paid benefit, nor on the state’s health as a whole (after all, health indicators are no better in the state than they were when expansion came into effect). This is because of unpleasant truths expansion backers don’t wish to face, despite the data.
Expansion was supposed to increase delivery of health care; instead, it only expanded access that didn’t make delivery much more attainable. Since Medicaid reimbursement rates are unappealing, provider expansion, especially in specialized medicine, hardly followed suit, thus increasing wait times for all Medicaid patients to see both scheduled and emergency care. The two are related, because the selling point of expansion was it would gravitate people without insurance away from emergency rooms and uncompensated care. Instead, many of the now-insured kept going to the ER for primary care, driving up costs further and causing hospitals to lose money faster.
Because of Louisiana’s charity hospital history, it typically had more uncompensated costs than almost any other state, and while after expansion these went down, Medicaid treatment losses more than outstripped that. This especially has been troublesome for smaller and/or rural hospitals, which is why big hospital chains stump for expansion since they derive rent-seeking benefits with their ability to sustain losses at discrete locations and/or at discrete times while others can’t.
And, a substantial portion of those having wealth transferred to themselves by expansion could, if not did, afford it. The latest research indicates 43 percent of the expansion population transferred from private insurance or would have, a figure rising to 56 percent among working individuals. This crowding out also has hurt hospitals, since private insurance pays better, and more generally has caused the imbalance with providers that discourages expanding the practicing medicine supply.
Of course, the stenography that typifies media coverage of the issue swallows the leftist tall tales that expansion saves money and improves health outcomes, and they fellow-travel with the left in reporting that Medicaid cuts would impact worse the special needs populations – allegedly because waiver programs and optional services would be cut, which wouldn’t be necessary if distributed through block grants – when in fact generally people with disabilities utilizing Medicaid would benefit. In Louisiana, for example, by dumping the expansion populations, the $500 million in savings could be plowed back into supporting these kinds of programs, such as by provider rate reimbursement increases that could alleviate the severe nursing shortage that plagues New Opportunities Waiver recipients than means many clients receive far fewer hours of services than they need and to which they are entitled.
Republican congressional leaders are on the right track. The expansion match should equate to the FMAP proportion and all matching dollars should come in block grant form. If that comes to pass, Louisiana should exit expansion and use the savings to better effect with populations that have genuinely great need for state assistance in health care.
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