A $7 Billion Problem

While the health care debate was raging in Washington, this column—on several occasions—noted that the “relief” for Louisiana that was included in the legislation was nothing in comparison to the hit to our state’s finances that would come from it. Recent comments from Louisiana’s Secretary of the Department of Health and Hospitals, Alan Levine, adds credence to that observation.

According to Levine, increased costs to Louisiana could be more than $7 billion in the decade after the federal subsidies to states go away.

Levine questions some federal and private estimates of the cost that Louisiana and other states will incur in the first five years after subsidies end in 2014. He pegs the figure at $2.7 billion in additional funds our state government will have to appropriate to cover direct costs. Additionally, the higher income threshold of eligibility for Medicaid coverage will, according to Levine, swell Louisiana’s Medicaid rolls by some 385,000 which will result in another $1.8 billion in higher costs to Louisiana. Those figures are for Louisianans who are currently uninsured who will be eligible to enroll in Medicaid.

But Levine argues that there will also be a significant influx of individuals who are currently insured who will drop their insurance and take the free coverage available under Medicaid. He estimates those individuals will add another $1.2 billion in costs to the state going forward.

But, according to Levine, the potential impact to the state’s budget doesn’t stop there.

The addition of hundreds of thousands of new Medicaid enrollees in Louisiana will exceed the ability of current Medicaid service providers to handle the influx. Many medical providers do not take Medicaid patients today because the reimbursement rates are below the cost of providing the services. In order to be able to provide adequate health care to the new Medicaid patients, he contends that reimbursement to the providers will have to be increased significantly. Significantly higher rates will be needed to maintain the medical personnel currently seeing Medicaid patients and to attract a larger number of them to serve the new enrollees. Levine estimates that it would take $1.5 billion in higher Medicaid reimbursement rates paid by the state to maintain the integrity of the system under the new federal law.

If Secretary Levine’s estimate of $7 billion in higher costs to Louisiana for the new health care law is even remotely close to being accurate, state finances will drown under this burden. The federal government is already facing intolerable budget deficits and debt levels going forward. There is little hope that it will subsidize states for their increased costs in the future even though it is the new federal law that is driving those costs. In a very few years, Louisiana will have to come to grips with an even more serious fiscal crisis than the one the governor and the Legislature are currently wrestling with.

“The states are going to be left holding the bag,” Levine observed.

That is an understatement. Once again, folks in Washington have over-promised and under-funded, and the price will be paid by the states.

Dan Juneau is the President of the Louisiana Association of Business and Industry.

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