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Louisiana: Facing Drop-Off in Federal Matching Funds for Medicaid

Louisiana's Governor Bobby Jindal (R) challenged President Obama's stimulus plan in his official Republican response to the president's address in February. A strong critic of the plan, Governor Jindal said he would turn down some of the temporary federal funding that would require Louisiana to make changes in state law—such as expanding unemployment benefits, which the governor indicated would force the state to raise taxes on businesses. Department of Health and Hospitals Secretary Alan Levine confirms that the state is not accepting federal stimulus funds for extending Transitional Medical Assistance (temporary Medicaid coverage) from one year to 18 months for families shifting from welfare to work.3 Nor does the Department plan to take advantage of the higher cap on disproportionate share hospital (DSH) money the state can draw down from the federal government, since the state is already unable to match the current cap. Despite the federal funding gain, these two expansions would cost the state more than $20 million over two years, and "lock the state into commitments that it cannot sustain…when you expand Transitional Medical Assistance, and more people qualify, and then the stimulus ends, exactly how do you cut the program back? You have committed these people to 18 months of coverage," said Levine.4

The recovery package has both positive and negative aspects, according to Levine. The federal HITECH grants will provide opportunities for states to develop and implement important improvements in health information technology. But Louisiana had already invested more than $20 million in developing a rural health information network. With ARRA federal funding beginning in 2011, Louisiana plans to put its HIT efforts on hold until then, in effect slowing down HIT progress. The governor is, however, supporting legislation that allows the rural hospitals to borrow the money against their expected federal funding.

The stimulus plan's FMAP increases will help plug holes in Louisiana's Medicaid program. "There's no question that the Medicaid increase will be helpful to us," said Levine, "but the state will still need to make cuts." The type and extent of those cuts will largely depend on the outcome of discussions with CMS over a huge "cliff" expected when both the stimulus expires and the FMAP declines. The post-Katrina influx of federal assistance dollars over the past few years resulted in a temporary, somewhat artificial increase in per-capita state income; this was used in the FMAP calculations, leading to a planned reduction in the federal match to Louisiana. "The state will go from an 80 percent stimulus federal match to a 63 percent rate in January 2011, with potentially devastating impact on the solvency of the Medicaid program," said Levine. He reports that the reduced federal match will annualize to an estimated $700 million in addition to losses when the stimulus expires.5

In an April 6 letter to the Department of Health and Human Services, Levine offers options to help address the impending crisis, such as federal "adjustments to the [FMAP] formula that do not take one-time, extraordinary infusions into account in establishing per capita income," and locking in a rate based on historic averages until the formula normalizes.6

Louisiana does hope to transform health care for the poor, and submitted a Medicaid waiver request to the federal government. The state proposes to expand coverage to poor adults, from 12 percent of the FPL to 50 percent of the FPL. The state would apply $780 million the federal government claims the state owes in Medicaid disputed disallowances over the past decade to cover the federal portion of the expansion. Also, the state would pilot a program in southwest Louisiana and Lake Charles that would close the public charity hospital, but provide full access to care to adults up to 250 percent of the FPL from existing private providers.

Louisiana's Division of Administration established a Web site for tracking federal stimulus funds. 

For more information

See: Louisiana Recovery Authority Web site 

3. The ARRA provides federal funds to extend otherwise expiring TMA for 7/1/09–12/30/10.
4. Also, Jindal rejected $98 million from the stimulus package in federal unemployment funds that would have allowed more residents to receive unemployment benefits.
5. Louisiana's federal match will decline for fiscal year 2010 from nearly 72 percent currently to 67.6 percent, and then to 63.1 percent for fiscal year 2011; its enhanced SCHIP match will decline from 80 percent to 74 percent.
6. Letter from Secretary Alan Levine, Louisiana Department of Health and Hospitals to Charles Johnson, Interim Secretary, US Department of Health and Human Services, April 6, 2009.

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