Wednesday, July 17, 2024

No clarity on what cutting of Louisiana’s healthcare budget means

by BIZ Magazine

By Julie O’Donoghue, Louisiana Illuminator

The Louisiana Department of Health could not say Friday what a surprise $100 million state funding reduction in the agency’s budget might mean for state health care, though it is expected to balloon and could possibly affect low-income residents’ access to medical services. 

“LDH is aware of the budget cuts the Louisiana Legislature made in the final hour of the 2023 legislative session, and LDH is evaluating the impact on services the Department provides,” wrote Kevin Litten, spokesman for the agency. “The Department’s priority is to continue services to our most vulnerable residents uninterrupted.” 

Gov. John Bel Edwards, health care lobbyists and several state lawmakers in both parties were blindsided Thursday evening when House and Senate leaders announced during the final minutes of their two-month session that state health care spending would be drastically reduced.

The impact of the reduction has the potential to grow to $500 million because the state uses its health care money to draw down more federal funding, advocates and the governor implied.

The reduction could specifically fall on hospitals that receive extra money to treat people with publicly-funded Medicaid insurance, and the loss of funding may cause those institutions to pull back on their services for low-income patients.

That a massive loss of health services would be on the table this year was mystifying to the governor, who noted Louisiana has an unprecedented amount of money to devote to state spending. It’s expected to bring an extra $2.2 billion over the next year.

“I don’t have a problem making cuts when necessary, but we have a $2.2 billion surplus,” said Sen. Jay Luneau, D-Alexandria, who voted against the budget plan over the health care reduction. “Why are we cutting the poorest of the poor?”  

Never-ending growth

The push for the health care reduction came from the Louisiana House, where conservative Republicans have long complained about the state’s ever-growing health care costs.

Many House members insist the health department has enough fat to sustain a $100 million loss without giving up much in the way of services.

“I don’t believe it will hurt them in the end,” House Conservative Caucus Chairman Jack McFarland, R-Jonesboro, said in an interview Friday. 

Approximately $20 billion of the state’s $44 billion budget passed Thursday is devoted to health care, and the governor had proposed increasing state funding for those expenses by $205 million over the current spending level. House conservatives argue pulling back $100 million from that increase shouldn’t have an overwhelming impact on services. 

House Appropriations Committee Chairman Jerome Zeringue, R-Houma, also believes the health department and other state agencies are “squirreling away” funding in anticipation of a change in governor next year. 

Edwards, a Democrat, could be replaced by a Republican who might try to slash government spending, and agencies are hanging onto money to soften the impact, he said.

The legislators’ health plan also directs the state to reduce some of the spending in one specific way. Of the $100 million reduction, $22 million must come from funding for the state’s Medicaid disenrollment efforts

Louisiana has started removing people from the Medicaid rolls after a three-year pause in doing so because of the COVID-19 pandemic. The state expects reducing the rolls to take about a year, but legislators are trying to force the health department to act faster through the $22 million cut. 

They want the Medicaid purge to happen over nine months instead of 12. But state health officials have repeatedly said that speeding up that process is more difficult than House members suggest. 

Louisiana Health Secretary Stephen Russo told lawmakers last month he couldn’t shorten the disenrollment timeline without federal approval — a process that could take several weeks.

Russo also said the state could face large federal fines if the Biden administration determined it was kicking people out of Medicaid recklessly, so it behooves the state to move through the program at a deliberate pace. 

Very few options

There also aren’t many easy places to make the other funding cuts required in the health department.

Over 70% of the state’s $20 billion health care budget is federal money. The $100 million cut would have to come exclusively from the state general fund portion of the spending plan, which is approximately $3 billion.

But almost every state dollar spent on health care is used to draw down multiple federal dollars for those same programs. So when a state dollar is cut, it has a multiplying effect. 

A large portion of Louisiana’s health care spending is also tied up in legally binding private contracts the state will still have to pay. The private organizations that run most of the state’s Medicaid program, for example, are estimated to receive $10.1 billion in this budget cycle, according to a financial report from December. 

Louisiana’s health care costs also grow, in part because legislators have mandated certain increases in spending. 

By law, the state has to raise nursing home rates every other year, which boosted health care funding by $126 million alone in the budget passed Thursday. Most of that money is from federal sources, but $31.8 million of that increase is from state general funds.

Legislators also included language in the budget saying none of the reductions could come from “waiver or disability services”— programs that provide care to seniors, children with chronic conditions and others. The directive essentially puts hundreds of millions of dollars off limits, leaving people with experience in health care budgeting to wonder where the $100 million cut will come from.

“This should have been discussed at great length,” said Sen. Fred Mills, R-Parks, who voted against the budget because of the health care reduction. “We should have had public hearings for days on this.”

As chairman of the Senate Health and Welfare Committee, Mills said he may schedule a series of public legislative meetings now so the $100 million reduction can be discussed in more detail. 

Who knew what and when 

It’s not unusual for lawmakers to vote on the budget plan during the final moments of the legislative session, but they have typically been prepped about what the major changes to the spending proposal are ahead of time.

But this year, only a very small group of legislators understood that a massive reduction to health care spending had been proposed before the session’s last hour. Most thought a large cut to health care services would never seriously be considered because the state is so flush with cash.

“It’s going to be difficult to explain how you have a surplus of $2.2 billion, and you still cut LDH by $100 million, and the cut was only discussed in the last hour of the session,” Sen. Cameron Henry, R-Jefferson, said.

Senate President Page Cortez, R-Lafayette, said he became aware the House leadership wanted to reduce health spending by $100 million Wednesday night, about a day before most other lawmakers. But he didn’t know there were restrictions on where the money could come from within the health care programs.

At a Wednesday meeting with House leaders, Cortez said he “begged” for copies of the budget documents that would have outlined the proposed cuts to health care and other changes in more detail. But he didn’t receive that paperwork until Thursday evening, right before the budget votes. At that point, he didn’t have enough time to brief senators on the plan and solicit feedback from them. They just had to take their votes.

“If I’m disappointed by anything, I’m disappointed about not having the opportunity to be transparent with the senators,” Cortez said. “It was a little bit unfair to the rest of the senators.”

Cortez said he would try to mitigate fallout in health care services during the monthly meetings of the joint legislative committee on the budget, where lawmakers have some authority to move around money outside of a lawmaking session. 

A veto fix? 

The governor has also said he is going to attempt to reverse — or at least lessen — the health care reductions, though Edwards wasn’t ready to reveal his plan for doing so.

“Stay tuned,” he said Thursday when asked about the strategy.

A few legislators believe the governor might be contemplating a line-item veto of the $100 million budget reduction, though that could create problems in other parts of the spending plan.

If Edwards reverses the $100 million health care cut, he’ll have to remove the same amount of money from another section of the budget to keep spending in balance.

This could mean cuts to projects and other initiatives that legislators prioritized. Many lawmakers only agreed to spend more state government money than expected this year because they were assured that it would go toward infrastructure projects in their home districts. If the governor starts shifting that funding into health care, it will likely frustrate lawmakers.

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