Some federal government relief on the issue of
Medicaid, as well as some overdue diligence in the program, could help
Louisiana to address tightening budget conditions.
Last week the state’s Revenue Estimating
Conference essentially reaffirmed projections
for the next few fiscal years. With tax cuts coming unless the Legislature
lengthens the duration of the sales taxes to roll off, revenues are projected
essentially to remain flat for fiscal years 2028-30. That means unless the
Legislature reduces spending and/or consents to use of the Budget Stabilization
Fund at least in FY27, the general fund budget may go into deficit given the
impact of price inflation.
Use of the BSF may not be all that bad, as it sits
at a near-record amount, but legislators can’t use it two years running.
Happily, final budget production last year by the federal government invites
reductions in Medicaid spending, and as does better diligence by states.
As
previously noted, reforms encapsulated in that budget process will give the
states strong incentive to cut back on this spending by the federal government
limiting extra payments to states to encourage reimbursement rates for Medicaid
to be only at the same level as for Medicare. They also create disincentives to
levy taxes on providers that are used as a device to grab more federal dollars,
which if applied to Louisiana would make the presumed deficit a bit worse
independently of the fewer dollars spent on Medicaid because of lower rates.
But the state has to help itself, and over the
past several years Louisiana has offended among the worst in refusing to do
this, at least up until 2024. Research
shows that since 2019, under the most plausible take-up rate (the proportion of
Medicaid expansion-eligible clients who do enroll in it), the state has one of
the highest rates of ineligible recipients, a shocking 62 percent, with in that
period the stunning highest per capita upwards change (nearly doubling)
of all the states, in that final term of Democrat former Gov. John Bel Edwards who
practically begged anybody and everybody to sign up except the obviously
wealthy.
Worse, this includes even the first year of unwinding
after the artificial inflation of roles during the pandemic period. Not all of
this comprised people flat-out ineligible for Medicaid; many eligible under
regular Medicaid likely were misclassified as expansion-eligible, and given the
perverse incentive that the expansion population receives a 90 percent federal
match while those with lower incomes and sicker receive get matched about 25
percent lower in Louisiana, states pay less by carelessness in categorizing recipients.
In part, that explains why Louisiana in 2024 paid
out only an estimated $90 million extra. But if all of the ineligibles were
otherwise qualified in no way – and remember the winding-down already largely
had been accomplished by the end of that period who were all ineligible under
regular standards – it would have been closer to $250 million. It’s not difficult
for that figure to be zero – several states managed that, and neighboring Oklahoma
had a misclassification rate of only one percent.
Using data for the upcoming 2028 rate equalization
assuming Louisiana will make up two percent of the total Medicaid population nationally
and its having a (among the highest of states) regular reimbursement rate of 65
percent (it varies among states), the state with great diligence in eligibility
determinations could save $600 million annually by then. That would solve for
and then some any predicted budgetary shortfall. It’s low-hanging policy fruit
and should be pursued.
