SADOW: Here Comes A Back-Door Attempt At Medicaid Expansion

Maybe the front door may seem closed, but the back door now is wide open for Louisiana health insurance ratepayers, out-of-pocket payers for hospital services, and taxpayers to see their health care costs increase as a result of Medicaid expansion by another name in the state.

HCR 75 by Speaker Chuck Kleckley, introduced on the final day of the session for such instruments, would establish a “hospital stabilization formula” by making an assessments on hospitals, which then in essence would be paid back through increased reimbursements. The need for these would come from an increased patient load under Medicaid expansion, with the assessment supposed to pay for the state’s portion under expansion, which begins at 5 percent in 2017 and then makes its way to 10 percent by 2020. The formula would begin on or before Apr. 1, 2016 if expansion is accepted by then, meaning for the first half of fiscal year 2017 there would be no assessment. Rural, small, and specialty hospitals, all of whom together don’t see much in the way of Medicaid business, would be exempt from the assessment.

Of course, there’s no free lunch, so somebody must pay for the assessment that matches the federal funds. And that would be you emptying your pocketbook for that. The amount owed by the state 2017 and after would end up from increased insurance premiums, increased retail costs to out-of-pocket payers, and from Louisiana taxpayers who fund insurance programs for state and local government employees and from the portion they pay in federal taxes that’s the federal match, because to afford their assessments hospitals simply will raise their costs of services and pass them along to insurers and others. The state estimates that in the FY 2017-26 period this would cost an extra $2 billion, even after removing out the alleged savings in reduced uncompensated care costs.

If that additional money bought better health care, maybe the whole thing could be worth it. But as the ongoing studies known as the “Oregon Health Experiment” continue to show, the best that can be said about expanding Medicaid’s impact on the uninsured population is they will be no worse off. In other words, this extra spending will accomplish nothing better, which begs the question of why to spend it.

And the mechanism of this formula could escalate costs far beyond the extra estimated $2 billion. Practically every state that has expanded has found they underestimated state costs, often by hundreds of millions of dollars a year in states even smaller in population than Louisiana. In part, this is due to administrative costs of expansion where states typically pick up nearly half of these. Plus, there’s nothing stopping Congress from blending costs with the current, annually-adjusted rate (around 62 percent) for all other Medicaid payments that would increase the proportion states pay above 10 percent, which would be a natural reaction to a program proving much costlier than anticipated and with a federal government facing its own fiscal pressures.

Thus, it’s a no-brainer that Medicaid expansion is a bad deal for the citizenry. But not for hospitals, because they are the direct beneficiaries of this wealth redistribution as money is transferred from the people their way, so they are all excited about this proposition. Which is why they supported and helped get passed the constitutional amendment last year that sets this up, and continue to propagate the argument that it’s this or continued reductions as planned in total uncompensated care payments by the federal government – not realizing as expansion has sputtered, Congress will have no choice but to reverse those cuts and will have greater incentive to do so by states not accepting the bad deal of expansion.

The way the amendment worked, the initial formula requires a two-thirds vote in each chamber to establish what the resolution proposes. If accomplishing that, which means that expansion opponent Gov. Bobby Jindal will get no opportunity to veto, then next year in the first couple of week of a regular session, or of any special session called prior to it, the new legislature and the new governor, who could be more amenable to accepting short-term benefits despite the greater long-term costs, will have the chance to pass a law accepting expansion, which would require only a simple majority.

Unfortunately, combined with the fiscal difficulties the state faces, this creates perverse incentives for bad decision-making. Seeking to grab any money available for future years, while the last part of FY 2016 and first half FY 2017 would see all “free” federal money and no assessment, encourages legislators to go for it. Legislators secretly seeing expansion as a pot of money that for a few years more would bring more to the state than take out who are running for reelection can vote for this and claim no acceptance of expansion has occurred, survive the electorate on this basis to return to office, and then not vote for expansion but as only a simple majority would be needed enough of their colleagues could do it – especially new ones who don’t want short-term budget headaches and figure they will have four years to dull the impact of a vote for it to their constituents – and still have the measure pass. And term-limited members with no immediate plans for state office can vote for this and then disclaim responsibility for expansion as they will not be there to vote on it.

So to keep up the quality of medical outcomes among the poorer in the state and for less cost, optimally defeat of HCR 75 will cut off at the pass any attempt at expansion next year. Hopefully, at least a third of members in at least one chamber will understand the wisdom of this rejection, and act accordingly. The citizenry can help by not letting them off the hook on this resolution – letting them know they know the stakes, and that defeating it serves the interest of the people.

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