The state Medicaid Estimating Conference met at the Louisiana Capitol last week to discuss how lawmakers could plan for “the lion’s share of the budget.”
Medicaid stands at nearly 38 percent of the Louisiana’s total state budget. The federal-state health care partnership program will cost $16.3 billion in fiscal year 2022, of which 18 percent will come from the state general revenue fund.
The estimating conference is required to meet at least three times a year and adopt a Medicaid cost forecast to help lawmakers accurately allocate Medicaid funds during the next regular legislative session.
Conference chair Sen. Sharon Hewitt, R-Slidell, reminded members the state budget must be balanced according to available revenues, and the Medicaid forecast is the planning instrument the Legislature uses to determine whether they are appropriating too much or too little money.
“This program is too big to not to have adequate data on future projected expenditures available during budget development discussions,” Hewitt said.
A 1% error across the entire program would produce a “variance” totaling $163 million, she said.
“This scenario grows to $407 million, $45 million would be state general fund, for a 2.5 percent variance, and over $800 million, or $90 million in state general fund, for a 5 percent variance,” Hewitt said.
“Again, Medicaid is simply too large not to have a thoughtful, well-developed system of checks and balances on our assumptions when building the budget. The MEC is intended to do that for the state of Louisiana,” she said.
Division of Administration Commissioner Jay Dardenne, the top official at the agency responsible for developing the state budget, said predicting costs will be difficult.
“Since this is an expenditure estimate, it’s obviously a very, very moving target during the course of the year as to what enrollment is, when enrollment is going to change based on when the pandemic ends; it’s a really tough year to try to predict expenditures,” Dardenne said.
Ruth Johnson, Medicaid executive director at the Louisiana Department of Health, said the federal Build Back Better budget proposal being debated in Congress also could have significant cost implications.
“We’ll be watching that closely,” Johnson said.
Dardenne explained the budget process involves timelines that complicate Medicaid forecasting ahead of the March legislative session.
State agencies submit their budget requests in the beginning of November, he said. The Office of Planning and Budget reviews them, and the Division of Administration begins meeting with various departments in December.
Department budgets could be presented in January and February, he said.
“I’m trying to wrap my arms around the practical use of the forecast and how it’s going to play out,” Dardenne said. “I just want to make sure we understand that as it is now … it’s not going to be able to be binding like the revenue estimating conference is.”
Hewitt said the conference should at least agree on program “assumptions,” or the factors that could determine the program’s biggest costs.
“At the end of the day, that’s where we can add value: in agreeing on the assumptions. Because that’s where you’re taking the risk in the forecast. After that, a lot of the numbers just fall out,” Hewitt said. “It’s like doing a math problem once you’ve agreed on how to set it up.”
The state Medicaid program had a variance of minus-11.54% in fiscal year 2021, or a $1.8 billion gap between allocated funds and program expenditures.
“Approximately $787 million of the ($1.8 billion) variance was to pay for a hospital payment methodology that was never implemented due to concerns expressed by the Centers for Medicare and Medicaid (CMS),” Hewitt said.