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Research & Commentary: Louisiana Seeks Vital Medicaid Reform

March 28, 2018

In this Research & Commentary, Arianna Wilkerson examines a proposal in Louisiana that would require Medicaid beneficiaries to contribute monthly to their health savings accounts as a condition of program eligibility.

Like several others states, Louisiana faces skyrocketing health care costs as a result of having chosen to increase its Medicaid program under the Affordable Care Act (ACA). ACA allows states to expand Medicaid to those with annual household incomes that are up to 138 percent of the federal poverty level (FPL). In 2018, an individual with an income up to $16,753, or a family of four up to $34,638, qualifies for Medicaid benefits in states with expanded eligibility.

Unfortunately for Louisiana taxpayers, officials underestimated the number of enrollees and the cost of the newly expanded program. As of March 2018, adult enrollment stood at 468,574, 53 percent higher than the initial estimate of 306,000. In fiscal year 2017, Louisiana spent on average $6,712 for each Medicaid expansion enrollee, compared to $5,575 per non-expansion enrollee, a 20 percent difference. Healthy Louisiana, the name of the state’s Medicaid program, now encompasses nearly 28 percent of the state’s total expenditures, a figure that is triple the size of the state’s Medicaid spending in 1985.

This is not uncommon; all the states that expanded their Medicaid programs under the ACA underestimated enrollment figures and costs.

Louisiana lawmakers recently introduced a proposal that would allow the secretary of the Louisiana Department of Health to apply for a Section 1115 demonstration waiver to the Centers for Medicare and Medicaid Services (CMS). The Section 1115 waiver would request the state assess a monthly premium on able-bodied Medicaid expansion recipients with incomes 100–138 percent of the FPL. Those with incomes below 100 percent wouldn’t have to pay monthly premiums, but doing so would grant to them access to additional benefits.

Premium amounts for all enrollees would be determined by a sliding scale that adjusts based on income. Monthly payments would fund a health savings account that would roll over annually. Failure to pay premiums for at least 60 days would result in a six-month lockout period for the offender and a deduction of unpaid premiums on his or her state income tax refund.

The Louisiana proposal is an example of a consumer-driven health initiative CMS supported in a letter to state Medicaid directors sent in January 2018. Premiums and health savings accounts give enrollees an incentive to take personal responsibility for their well-being. It also prepares Medicaid recipients for what to expect when enrolled in private-sector health plans after they leave the Medicaid program. Enrollees will be more cost-conscientious when shopping for health care products and services, which creates a more competitive marketplace. In addition, state health care costs will decrease, an outcome desperately needed considering Healthy Louisiana’s bleak fiscal future.

Seven other states, including Arkansas, Indiana, and Kentucky, have already succeeded in having waivers approved by CMS that institute monthly premiums, work requirements, and other Medicaid program reforms. A separate waiver request now under consideration in the Pelican State would implement work requirements for able-bodied Medicaid enrollees.

In the Policy Study “Don’t Wait for Congress to ‘Fix’ Health Care,” Heartland Senior Policy Analyst Matthew Glans outlines how lawmakers can reform health care in their states. Glans concluded in the study, “Medicaid is an expensive program that provides very poor quality care. … Instead of being reactive to what’s happening in Washington, DC, state lawmakers should be proactive, applying for waivers from HHS to allow for more control over their Medicaid programs and adopting a state reform agenda.”

Louisiana lawmakers have an important opportunity to institute vital reforms to the state’s Medicaid program. If they fail, the program’s long-term viability will remain at risk until the necessary changes are made.

 

The following documents provide more information about Medicaid and the ACA expansion.

A Better Way: Reforming Medicaid in Louisiana
https://pelicaninstitute.org/wp-content/uploads/2018/01/PEL_MedicaidPaper_FINAL_WEB.pdf
Chris Jacobs, Senior Fellow with the Pelican Institute, examines Louisiana’s Medicaid program, its failures, and how the state could use the waiver process to bring needed reforms. “Given the two options, the choice for Louisiana seems clear. The state should use the flexibility promised by Washington to unwind Medicaid expansion for the able-bodied, and modernize and re-orient the program toward the program’s original intended beneficiaries. By so doing, the state can go a long way towards resolving its structural fiscal shortfalls, while also improving the care provided to some of Louisiana’s most vulnerable residents,” writes Jacobs.

Section 1115 State Innovation Waivers: Current Status and Potential Changes
https://www.kff.org/medicaid/issue-brief/section-1115-medicaid-demonstration-waivers-the-current-landscape-of-approved-and-pending-waivers/
The Kaiser Family Foundation provides an overview of Section 1115 Medicaid waivers, how they are approved and financed, how states have used them, and how they have impacted health care reform thus far.

The Growing Medicaid Expansion Bubble
https://www.heartland.org/news-opinion/news/the-growing-medicaid-expansion-bubble?source=policybot
In this edition of the Consumer Power Report, Executive Editor Justin Haskins examines Medicaid expansion and all the problems it has created for states, physicians and patients. “Despite the lack of attention the issue is getting, the growing Medicaid population could lead to state government meltdowns around the country and a national health care crisis for which most Americans are completely unprepared,” wrote Haskins.

Government Report Finds Obamacare Medicaid Enrollees Much More Expensive than Expected
http://www.forbes.com/sites/theapothecary/2016/07/20/government-report-finds-that-obamacare-medicaid-enrollees-much-more-expensive-than-expected/ - 75a85aba2dd0
Brian Blase of the Mercatus Center at George Mason University wrote in Forbes the costs for newly eligible adults were not decreasing as expansion supporters predicted they would. Blase says in a new report, HHS says newly eligible adult Medicaid enrollees cost about 23 percent more than the Medicaid enrollees who were eligible prior to expansion.

Why States Should Not Expand Medicaid
https://www.heartland.org/publications-resources/publications/why-states-should-not-expand-medicaid?source=policybot
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over spending to better fit coverage expansion to states’ needs, resources, and budgets.

Don’t Wait for Congress to Fix Health Care
https://www.heartland.org/publications-resources/publications/dont-wait-for-congress-to-fix-health-care
In this Policy Brief, Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs or submit even more ambitious requests for waivers to the Department of Health and Human Services – a suggestion the Trump administration has encouraged.

Obamacare Expansion Enrollment Is Shattering Projections
https://thefga.org/wp-content/uploads/2016/12/ObamaCare-Enrollment-is-Shattering-Projections-1.pdf
This 2016 report from the Foundation for Government Accountability (FGA) explores the effect Medicaid expansion has had on states. FGA found Medicaid expansion projections vastly underestimated the amount of able-bodied adults who would sign up for Medicaid expansion under the ACA. The result, the report’s authors claim, is a fiscal crisis that has forced states to cut spending in other areas of their budgets, such as education and transportation.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact Arianna Wilkerson, Heartland’s government relations coordinator, at awilkerson@heartland.org or 312/377-4000.

Author
Arianna Wilkerson worked in government relations at The Heartland Institute from 2017 - 2019.