IS THE “CURE” WORSE THAN THE DISEASE?

by Dan Juneau

There has been a lot of discussion in the media recently about Senator Mary Landrieu’s amendment to the health care legislation that would reduce Louisiana’s Medicaid funding problem by a total of $300 million over time. This funding problem is caused by a federal formula that will reduce Louisiana’s health care funding by what could be more than $2.5 billion over the next five to seven years.

Louisiana is facing severe budget shortfalls for at least the next several years. Close to a billion dollars in reductions must be found in the 2010-2011 budget and perhaps even more in the following one. Anything that Senator Landrieu and the other members of our Congressional delegation can do to convince the federal government not to penalize our Medicaid program due to glitches in the funding formula would be helpful—BUT, such assistance should not come in a vehicle that will cause much more harm than the relief it would bring.

Senator Landrieu’s amendment is contained in a bill that would severely impact state finances for years to come. Her amendment is for temporary relief from one Medicaid funding problem. Unfortunately, it is contained in legislation that will permanently create much larger Medicaid funding problems for Louisiana. The problem lies in the provisions of the health care bill that expand the number of individuals that will be eligible for Medicaid. This expansion is not free and may cost Louisiana taxpayers billions of dollars going forward. Due to the speed with which the legislation is moving through the process, there is not even time to fully understand all of the different costs in the bill. But one certainty is that Louisiana taxpayers will be on the hook for far more than the $300 million of one-time money Senator Landrieu put in the bill. In fact, estimates of direct costs for the state range from $130 million per year just for the Medicaid expansion to as much as $400 million per year when lost funding for our public hospitals is considered. The math is fairly simple: The permanent costs to Louisiana outweigh the $300 million temporary benefit.

Given the net cost to the state, what will the impact be on Louisiana’s taxpayers and small businesses? Cost-cutting and streamlining commissions are trying to find close to a billion dollars in potential savings to offset current revenue losses in the state budget. A billion-dollar reduction will significantly impact post-secondary and K-12 education, highway construction, coastal restoration efforts, and every aspect of state services. If the health care legislation in Congress passes in its current form, it will dig the state’s budget hole much deeper at the worst possible time.

There are certainly many other valid reasons to have concerns about the bill being debated in the U.S. Senate. The additional taxes ($400 billion) and proposed Medicare “savings” ($500 billion) will accelerate the cost-shifting that has significantly increased private health insurance premiums in the past. Medicare itself has a $36 trillion unfunded liability that will likely be expanded—not reduced—by the legislation. The expansion of Medicaid coverage will also increase the cost-shifting that drives up the cost of private health insurance premiums. New mandates, taxes, and record-keeping requirements on employers have many small businesses worried about the fiscal impact coming their way if the legislation passes.

The recent back and forth in the media about the Landrieu amendment misses the real point: if the “help” for Louisiana comes via a bill that forces more cuts to education, highways, and vital state services in our state budget, how can it be considered help at all? Senator Landrieu and all of the members of our Congressional delegation should not vote for a bill that will gut our state budget in the name of creating new entitlements in Washington.

Dan Juneau is the President of the Louisiana Association of Business & Industry (LABI)

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