If You’re Wondering How Louisiana Can Raise $2 Billion In Taxes And Still Have A Deficit, This Is One Reason…

courtesy of the Baton Rouge Business Report.

The Medicaid expansion in Louisiana is projected to cost $376 million more than expected this year, as older and costlier uninsured patients sign up for the free coverage, according to the latest data from the state health department.

As The Associated Press reports, the estimated price tag for the program is now $2.3 billion this fiscal year.

But wait! Everything is fine…

But it won’t be a drain on the state’s deficit-riddled budget. The Louisiana Department of Health says the shortfall will be covered entirely by federal Medicaid financing, as long as lawmakers agree to plug the federal dollars into the budget.

The data also means Louisiana’s long-term costs for the Medicaid expansion could be higher than anticipated when Gov. John Bel Edwards embraced the government-financed coverage for the working poor earlier this year.

Jeff Reynolds, chief financial officer for the health department, says the latest numbers suggest the program will cost more not just this year, but also in later years. However, he says the state has financing sources that will cover the increased costs.

Reynolds notes Louisiana is saving an estimated $184 million this year by tapping into the Medicaid expansion’s enhanced federal financing rates for coverage the state already had provided to the poor and uninsured. The higher federal match rate makes the care cheaper for the state. The health department anticipates the state will save money on the Medicaid expansion for the next five years.

If you actually believe that, you’re a fool. Louisiana’s budget growth from last year to this year is almost entirely taken up by the expansion of Medicaid – some $2 billion worth in the Department of Health and Hospitals. Virtually everything else in the budget is either a cut or a standstill. And there was $2 billion in tax increases, which surprisingly didn’t actually materialize. How much of that involves administrative costs in DHH which aren’t covered by Uncle Sam? How much is the state losing in taxes on health insurance plans which are depopulating thanks to people switching from private insurance to Medicaid?

Oh, nothing. This is all federal money, you see. Everything to the end of the year is fully funded by the feds. Next year it isn’t; next year the state picks up 10 percent of the cost. Which means that $376 million is a $38 million hit to the state budget – or a little more than the entire state general fund appropriation for the University of New Orleans, let’s say.

That’s if you assume there are “only” 405,000 people on Medicaid next year – there were supposed to be “only” 376,000 people getting health insurance from the welfare state this year and instead there are 405,000. The ubiquitous TV ads across the state inviting people to sign up for government health insurance worked better than anybody thought.

It’s a fiscal train wreck already which is being covered by accounting tricks, but those won’t work in the future.

And someday soon, probably when interest rates rise and the debt service on the $20 trillion the federal government owes explodes, Congress is going to cut corners as best it can and that 90 percent federal share will drop to 80 percent, or 70 percent. When that happens, the $38 million our governor consigned us to pay is going to be $76 million, or $114 million.

But the additional 10% the state will have to come up with future years will already be a burden. The state is already having to cut the budget in the middle of the year to make up shortfalls in revenue. The “free” Medicaid money will result in either having to raise taxes or cut more in other state agencies.

What universities does John Bel Edwards want to close?

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