Budget goes from bad to worse

Louisiana’s budget outlook – already bleak thanks to slumping oil prices and years of mismanagement by the outgoing Bobby Jindal administration – took a precipitous turn for the worse over the holidays. Incoming Commissioner of Administration Jay Dardenne told reporters last week that the state needs an extra $750 million to pay its bills through the June 30 end of the fiscal year, and $1.9 billion to bridge the gap between revenues and expenses next year. With the budget already having been cut sharply during the Jindal years, revenue increases – through a combination of tax hikes and a rollback in tax exemptions – are all but inevitable. As Nola.com’s Kevin Litten reports, Dardenne was not shy about fingering the culprits:

Dardenne excoriated the budget practices of the current administration of Gov. Bobby Jindal, which have included sweeping funds of excess revenue, using money from one-time sources such as legal settlements and using “gimmicks” such as the deeply unpopular SAVE legislation floated last year. At one point, Dardenne, a former state senator, described this year’s budget as a “house of cards” and said the budget situation is the worst he’s seen in his 24 years in state government. “We’ve had eight years of basically pushing the problem down the road, balancing the budget with one-time revenues that aren’t coming back, raiding funds that had never been raided before,” Dardenne said. Combined with the falling revenues, “It’s a perfect storm for the kind of problems we’re facing right now.”

Litten also provides a handy breakdown of the culprits that created the mid-year deficit, which is only partly the result of slumping oil prices. Failure to accurately anticipate Medicaid costs, a slowdown in sales and corporate tax receipts and unbudgeted expenses for TOPS and state prisoners have also contributed.

Advocate: Stelly repeal was a mistake

Louisiana’s fiscal crisis would be more manageable had state legislators – including Rep. John Bel Edwards – resisted the temptation to approve massive tax cuts for upper-income households in 2007 and 2008, when the state’s economy was in overdrive thanks to post-hurricane reconstruction spending and record-high oil prices. As The Advocate’s editorial board rightly notes,

There are many factors in the state’s current financial problems, including a national recession and lavish giveaways of other tax breaks by Jindal and lawmakers. Edwards gained applause from his business audience when he said he would differ with Jindal in many ways. But as Edwards noted, the state’s biggest budget problems began with the partial repeal of the Stelly Plan… In a perfect world, once it became clear — as Edwards noted in his speech — that the state would be losing $700 million to $1 billion a year in needed revenue, the politicians would have come together around a restoration of the income tax provisions. That’s never happened, in part because of Jindal’s stubborn fealty to an anti-tax and anti-government ideology. Also, in part, because the Legislature has been too busy preening itself on cutting taxes for better-off constituents, even as it has raised tuition at universities and made serious cuts to state services.

Medicaid expansion: Keep it simple

Nola.com columnist Bob Mann visited Iowa over the New Year’s holiday and came away with an important lesson for Medicaid expansion in Louisiana. The Hawkeye State expanded Medicaid under the type of complex federal waiver that U.S. Sen. David Vitter was advocating for Louisiana during the gubernatorial campaign. The results have been disastrous.

Officials here forced many of the state’s working poor (those who earned between 101 and 138 percent of the federal poverty rate) into choosing insurance from one of only two private providers. Poorer workers enrolled in the state’s existing managed care plans. The problem, however, is that Iowa officials designed an unworkable and overly complex expansion that promptly proved a failure. One of the insurance companies quickly became insolvent as premiums rose and the state misjudged the number of new enrollees into the health plans. Both companies eventually withdrew. By last July, Iowa officials scrapped the program. However, instead of doing what they should have done all along – just open up Iowa’s existing Medicaid program to the new enrollees – they have now slapped together another complicated waiver program. This time, Branstand wants to compound his error by forcing all of Iowa’s Medicaid recipients – more than 560,000 people – into a hastily planned, new managed care program that opponents say is not ready to handle all its new customers.

Mann concludes, with an assist from LBP’s Steve Spires, that the best approach is to fold new enrollees into the state’s existing Medicaid managed care plans rather than building a new model from scratch.

Edwards has said he wants to expand Bayou Health, the private managed care program that Jindal created in 2011 to provide Medicaid to 1.2 million Louisianians. “I think this is the right move,” Steve Spires, a senior policy analysis with the Louisiana Budget Project told me. “While the oversight of Bayou Health under Jindal has been lacking in places, I think the concept of managed care, done correctly, can improve care and provide better accountability than fee-for-service Medicaid. I hope the governor-elect moves to improve Bayou Health.”

Controlling the cost of Medicaid

While other parts of the state budget have been cut drastically in recent years, Louisiana’s Medicaid costs have continued to rise as more people enroll in the health insurance program and use more services each year. As Mark Ballard reports in The Advocate, controlling the cost of Medicaid will be a key challenge for the next administration.

Medicaid spending has grown so much since 2008 that when all the prodigious cuts to other parts of state government are added up — and adjusted for inflation — the eight-year total covers less than half the increased costs for doctors, hospitals, pharmacists and other providers of health care to the poor.  And state Rep. Julie Stokes, who made the calculations, said that’s only Louisiana’s portion of Medicaid expenses. The Kenner Republican is a certified public accountant who has been touring the state on behalf of the Committee of 100, a group of executives advocating structural changes to the state’s fiscal system to prevent recurring deficits.

Around the country, Medicaid costs are rising slower in states that expanded their programs to cover low-income adults than in states like Louisiana that have refused to take advantage of federal dollars.

But elsewhere, much of the spending increases came in states that joined the Medicaid expansion, according to the Kaiser Family Foundation, the respected think tank on health care issues. “Beyond enrollment, states reported that the other drivers of increases in spending were provider rate increases and the higher cost of health care, including prescription drugs.” Kaiser reported. But the impact on the states’ portions was less in states that expanded Medicaid — expenses went up 3.4 percent — than it was in states, like Louisiana, that did not — where expenses went up an average 6.9 percent.

Number of the Day
330,000 – Increase in the number of Medicaid enrollees in Louisiana since 2008 – a jump of 31.2 percent (Source: DHH via The Advocate)