Medicaid Reductions to Hit Louisiana Hospitals 

July 20, 2012

Louisiana hospitals will see reductions in Medicaid payments as a result of compromises in a federal transportation spending bill passed earlier this month. 

The bill reduced the state's Medicaid funding by $651 million to pay for transportation and related projects, some in other states. 

A rationale for the cuts was that a provision of the Affordable Care Act overpaid Louisiana billions of dollars for the lingering effects of Hurricane Katrina which had resulted in lowering the state's Medicaid match rate. But a substantial portion of those excess funds were taken back last year to help fund an extension of federal tax cuts.

The changes in the transportation bill took Louisiana legislators and policy makers by surprise, as negotiations over funding changes were done via email exchanges, largely out of the public eye. Partisan wrangling had stalled work on the bill for months, leading most observers to believe that a quick resolution was unlikely. 

Based on anticipated funding levels, state officials had originally budgeted more than $400 million in additional federal funds for 2013, with sufficient state funds to match.

With passage of the transportation bill, however, Louisiana will now be cutting $287 million in state funds for a total reduction of $859 million to hospitals in the state. 

That cut represents an 11 percent reduction in the state's $7.7 billion Medicaid program. Most of the reduction will be via disproportionate share hospital (DSH) payments and cuts in reimbursement rates.

Louisiana State University system hospitals are the biggest losers, with both compensation for treating uninsured patients and Medicaid reimbursement receiving hits. All together, LSU facilities are slated to lose $316 million in Medicaid-related funds.

Non-rural hospitals will see reductions in DSH and reimbursement payments, while rural hospitals will lose DSH payments entirely.

The Louisiana Hospital Association said in a statement that DSH cuts to rural hospitals "will be critical and will lead to reductions in services and possible hospital closures. This could leave gaps in healthcare delivery for patients in rural areas, as well as economic losses to those communities."

 The Bayou State was not an overall loser in the negotiations over the bill, receiving enhanced funding for coastal restoration, but that is small consolation to health care providers that have seen Medicaid payments cut in recent years.

The cuts to Medicaid funding could have been even more severe. Key House negotiators, including Energy and Commerce Committee chairman Fred Upton (R-MI), originally proposed cutting $1.3 billion in Louisiana FMAP funds.  Members of the Louisiana delegation had little say in the final shape of the cuts.

Louisiana Governor Bobby Jindal has said that he would not call a special session to consider a tax increase to offset the federal cuts, stating his support for a balanced budget that doesn't raise taxes. Jindal has also said that the state would not expand Medicaid coverage as provided under the ACA.