Medicaid and the state budget

As Louisiana policymakers convene for a special session to address a $304 midyear budget gap, some analysts are claiming that growth in the state’s Medicaid budget is to blame for cuts in other areas of the state budget. Former state Treasurer (now U.S. Senator) John Kennedy recently made the case in the Livingston Parish News:

The rising cost of Medicaid is why TOPS has been cut. The rising cost of Medicaid is why we can’t pay our teachers more. The rising cost of Medicaid is why the interstate is a parking lot in Baton Rouge. The rising cost of Medicaid is a core reason the state is running deficits.

Medicaid is indeed a large program; the largest in the state budget. The program provides health care for people who cannot afford to pay: Elderly people needing nursing home or community-based care, people with disabilities, pregnant women and children from low-income families. Starting July 1, the program also provides coverage for low-income,working-age adults who earn below 138 percent of the federal poverty level ($16,243 per year for a single person).

As policymakers consider making cuts to the Medicaid budget, they should keep some facts in mind about what’s actually driving cost increases in the program.

More people are covered by Medicaid. And that’s a good thing. Overall Medicaid enrollment climbed 33 percent from 2008 to 2016. The vast majority of that growth is because the state is covering more children, who are fairly inexpensive to cover. But when you adjust for enrollment growth and inflation, the cost per enrollee is actually the same as it was in 2005.

• Some parts of the Medicaid program are growing much faster than others. Spending on nursing homes, for example, grew 39 percent from 2008 to 2016, even though the overall nursing home population has been essentially flat. But the nursing home program is growing, in large part, because the Legislature and voters decided to lock their Medicaid rates into the state constitution, which was then ratified by voters. The overall cost of waiver programs that allow people to get long-term care in community-based settings, has grown even faster (44 percent) over the same period.

• The current-year (FY 2016-17) Medicaid budget looks inflated compared to the previous year because of a cost-shift maneuver by the outgoing administration of Bobby Jindal. Facing a mid-year budget deficit in late 2015, the administration (with the Legislature’s approval) pushed an entire month of Medicaid claims into the following fiscal year. That meant the state paid only 11 months of claims in the 2016 fiscal year but was on track to pay 13 months of claims in the current fiscal year. (Gov. John Bel Edwards’ administration subsequently pushed the 13th month of claims into the 2018 budget cycle).

• The federal match rate has changed. Almost 400,000 working-age adults have signed up for coverage since July 1, and for this population the state is paying only 2.5 percent of the cost of their premiums, with the federal government picking up the rest (this rises to 5 percent next year). But for most of the remaining Medicaid population, the state’s cost-share has increased in recent years – from 27 percent in 2008 to 38 percent this year.

In other words, if legislators want to attack the growth in the Medicaid budget it will mean reducing spending on low-income seniors in nursing homes, or cutting off benefits for people with disabilities who are getting care in their communities. Alternatively, they could cut off health care for low-income children and working-age adults who otherwise would have no access to care. And that would be a shame, because the data show that Medicaid is working.

Nationally, studies show that having Medicaid coverage improves health and financial security, boosts long-term educational and health outcomes for children and reduces mortality rates. Here in Louisiana, almost 60,000 patients have received health screenings since July 1 because of Medicaid expansion, and more than 4,000 people are being treated for diabetes or hypertension as a result.

Medicaid’s critics like to say that the program is “broken.” But the people getting covered know better. Maybe that’s why surveys show people who receive Medicare or Medicaid, on average, are happier with their coverage than patients who have private insurance.