SADOW: Louisiana’s Budget Mess Is Made Worse By Medicaid Waste

As red ink prepares to wash over Louisiana as a result of Democrat Gov. John Bel Edwards’ Wuhan coronavirus restrictions, the low-hanging fruit to help ameliorate that would be reversal of Medicaid expansion, but at the very least establishment of realistic protocols to vet the waste-ridden program.

Louisiana’s taxpayers now pay (according to the latest fiscal year 2019 data) an extra $312 million annually to foot the bill for expansion, where roughly a third to half of these recipients used to pay their own way. Worse, a fair amount of it involves dollars wasted through inept government administration if not paying outright fraudulent premiums and claims.

Since 2014, nationally the improper payment rate to Medicaid clients has soared from just under 7 to nearly 22 percent. Analysis of the difference in large part attributes this to expansion, particularly in the vetting of initial applicants and periodic review. In a report, Louisiana was singled out as one of the more egregious violators in this regard.

Put in dollar terms and assuming the state tracks the country, a historical error rate of 7 percent for five-sevenths of Louisiana Medicaid spending with all of it now at 22 percent means the two-sevenths that comprise expansion has an astronomical error rate of just over 50 percent. That would equate to almost $160 million a year wasted by Louisiana because of expansion benefiting ineligible recipients.

Perhaps part of a rate that has more than tripled has come as more instances of inappropriate payment made for regular Medicaid, which makes up three-fifths of all payouts, and/or the other two-sevenths of which almost half goes to nursing homes, also have occurred. Still, it’s clear that expansion vastly increased the amount of waste, if not fraudulent activity, connected to Medicaid.

Work by the Louisiana Legislative Auditor buttresses this argument. Over the past couple of years it has monitored scrupulously Medicaid spending and in one effort specifically designed to investigate expansion payments the office discovered in 2018 an 8 percent error rate costing taxpayers needlessly $111 million, which it felt could be reduced significantly if verification measures included access to wage data – a tool implemented prior to Edwards’ taking office which he immediately reversed.

Keep in mind that, given the national data, Louisiana’s rate likely climbed significantly for 2019, although it could have been worse. Buffeted by the unfavorable publicity, in 2019 Louisiana Medicaid began asking for quarterly rather than annual eligibility checks and for a limited number of recipients began to use actual income data instead of self-reported numbers. However, none of this checking extends to the intake process and doesn’t cover many existing enrollees.

Further, until this year Democrats in key legislative positions have stymied efforts to increase the Auditor’s ability to collect tax data to investigate erroneous payments. Elections in 2019 gave Republicans positions needed to pass such legislation, but likely Edwards still would veto such things, as part of his agenda is to redistribute as many dollars as possible to his political base and more stringent measure would subvert that.

Additionally, with the pandemic afoot, the Edwards Administration in line with federal guidance chose to keep ineligible people on Medicaid and they can stay on it until the middle of March, 2021. In this environment, reform-minded legislators didn’t try to move any bills in 2020 that would have fixed the leakage.

Hopefully, the 2021 session will see a resumption of such measures that culminates with these ending up on Edwards’ desk, at least to test whether he is bold enough to give taxpayers a middle-fingered salute with vetoes. Yet given the impending pandemic-induced potential huge budget shortfall headed Louisiana’s way, Edwards may have no choice but to relent. He and legislators need to do the smart, not the politically-driven, thing and plug the Medicaid holes that vastly multiplied as a consequence of expansion.

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