Louisiana is getting what amounts to a $1.5 billion bailout from the federal government to keep the state's Medi-caid system afloat.
After a contentious battle in the House, the state's nine-member congressional delegation successfully attached an amendment to the recently passed federal budget bill that will fund the state's Medicaid program at current levels.
"The new law gives Louisiana more than a year to get its fiscal house in order, and (it comes) just when the state Legislature is about to go into session to deal with this funding crisis," said Sen. John Breaux (D-La.)
At a point when Congress is debating multibillion-dollar cuts in the Medicaid system, the bailout may appear to be oddly timed. However, Louisiana officials had warned that without it the state would have had to lay off hundreds of healthcare workers.
The bailout came with just weeks to spare: Louisiana begins its new fiscal year July 1. Like other states, it was supposed to start funding its Medicaid program under a new formula that same day.
Medicaid is a matching formula, and according to a law passed in 1993, states must put up at least 28% of total funding. In the past, Louisiana has allocated $350 million in state money, or about 14% of total funding, but it's also used $900 million in Medicaid disproportionate-share funding to make up the rest of its match.
The disproportionate-share program reimburses hospitals for the extra expense of treating large numbers of poor people. Congress voted in 1993 that states can't use other federal funds to draw more money for their Medicaid matching funds.
Under the new law, the state's federal Medicaid funding, which had been $2.6 billion, was set to drop to slightly more than $1 billion. That left the state to make up a whopping $1.5 billion shortfall either in cuts or new taxes. The state's Legislature had not been able to devise a way to cover the shortfall. A plan to start a statewide HMO using the state's charity hospital system was rejected by federal officials last year (June 12, 1995, p. 6).
Thanks to the federal bailout, Louisiana's Medicaid funding will remain at $2.6 billion for two years.
"This gives Louisiana two years to breathe," said John Jurovich, vice president of the Louisiana Hospital Association.
Jurovich and other state health executives said without the federal bailout, the state would have had to shut down its system of nine charity hospitals. The flagship of that system is Medical Center of New Orleans. Jurovich said "bunches of people" would have been out of work without the bailout. He added that the burden for indigent care would have been shifted immediately to the state's private hospitals.
Critics contended that Lou-isiana already had enough time to prepare for the big cuts in Medicaid spending.
"We gave them (Louisiana) two years to wean themselves from their addiction to these federal payments and to get away from the federal trough," said Rep. John Dingell (D-Mich.) in criticizing the bailout last month. "Unfortunately, my Republican colleagues seem to be operating under the philosophy that no bad deed should ever go unrewarded."
He was joined in dissent by Rep. Henry Waxman (D-Calif.). "(Louisiana state officials) are being rewarded for their bad deeds, by the power of those in their delegation that have been able to exact this special pork barrel treatment for the state of Louisiana," Waxman said.
As chairman of the House Appropriations Committee, Rep. Bob Livingston (R-La.) demonstrated the clout he could use for his home state.
Livingston argued that the amendment provided a template for the Republican proposal to issue Medicaid block grants to the states. The federal government's match to Louisiana will not increase in the two-year period, while other states will see an increase in Medicaid funding, he noted.
"Because Louisiana is willing to forgo the growth in their program in the funding for Medicaid in the out years, (Congress has) been able to provide all the states with additional growth in Medicaid dollars," Livingston argued. Still, he pleaded that for Louisiana, "this is an urgent situation; it is an emergency."
The effort was bipartisan, with Breaux receiving the White House's blessing for the deal. The amendment was attached to a bill that had broad support because it averted a third shutdown of the federal government.
A key to the deal was that the extra $1.5 billion wasn't going to cost the government more than already budgeted. That's the amount Louisiana now receives in Medicaid funding, so continuing that funding didn't add to the budget deficit, Louisiana representatives argued. Initially, representatives asked for a five-year window for the state but compromised on two years.
Interestingly, the criticisms raised by Waxman and Dingell eventually backfired, as Louisiana's representatives reminded colleagues about bailouts for Michigan when the auto industry soured and the recent billion-dollar funding for earthquake relief in Waxman's state of California.
"We're in a slowly rebounding economy," Jurovich said. "In a state of about 3 million, we have 900,000 who are uninsured or underinsured."
He added: "The fact is we had a program that relied upon (disproportionate-share) funding. While it may have been questioned by others, it was approved by the powers that be. The federal authorities had prior knowledge, and if it was good enough for others, it should be good enough for Waxman."