Landry budget grows Medicaid

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Gov. Jeff Landry has made public moves to cut state government spending in recent weeks, following the lead of President Donald Trump's Department of Government Efficiency and its dramatic reductions at the federal level.

Shortly after Trump announced the creation of DOGE last year, Landry followed with his own government efficiency task force, which is officially called the Fiscal Responsibility Program but which the governor's office has started to refer to as "La. DOGE" recently.

Yet for all of the talk about cost-cutting, Landry's own budget proposal includes one major increase in spending that could overtake the savings measures he has floated.

Louisiana's heath care budget is set to increase almost $1.5 billion next fiscal year under the spending plan Landry unveiled a few weeks ago. Medicaid is fueling the growth, accounting for $19 billion of Landry's proposed $21.4 billion health care budget.

Medicaid provides government-backed health insurance to low-income families, pregnant people, seniors in nursing homes and those with disabilities. In Louisiana, approximately 1.6 million people, or a third of the state's population, get health insurance through the program.

A billion-dollar-plus increase in health care spending isn't unheard of in Louisiana, but Landry's $1.5 billion jump comes at a time when Republicans in Congress and Trump may force unprecedented cuts to Medicaid spending.

Louisiana is also running approximately $100 million over its Medicaid budget for the current budget cycle that ends June 30, according to a letter Louisiana's interim health secretary Drew Maranto sent to legislators.

As a conservative, Landry was expected to take a more skeptical approach to public health care spending when he came into office last year, especially compared with his predecessor, Democrat John Bel Edwards.

Yet Landry's $1.5 billion growth proposal would be the second largest increase in Louisiana health care spending since 2017, the year after Medicaid expansion took place. It's greater than most years Edwards was in office, from 2016-24.

The only larger jump in state health care funding recently took place in 2021, when the federal government plowed money into Louisiana for the COVID-19 pandemic.

The Landry administration attributes much of his proposed health care increase to costs it can't control.

The six private health insurance companies that run most of Louisiana's Medicaid program said they had more money because their Medicaid enrollees used more expensive health care services than expected. Maranto specifically mentioned the rising costs of prescription drugs in an interview Tuesday.

Former health secretary Michael Harrington, who held Maranto's job until last week, also said in an interview earlier this month that the state has brought some increased Medicaid costs upon itself.

For example, lawmakers and voters approved a state constitutional amendment 11 years ago that requires nursing homes, whose owners are large political donors, to receive a Medicaid rate increase at least every other year, even when their services don't change. In Landry's latest budget proposal, this provision has resulted in an additional $105.4 million being set aside for nursing homes, which already receive over $1 billion each year.

Louisiana also isn't alone in seeing soaring Medicaid costs. All states are seeing Medicaid expenses go up this year, in part because Medicaid enrollees appear to be sicker than expected, according to the Associated Press.

"This is no simple bullet that is going to fix this for Louisiana anymore than any other part of the country," said Steven Procopio, president of the independent Public Affairs Research Council of Louisiana.

Even with a $1.5 billion increase, the Landry administration insists it has taken steps to control spending in the state health department. It cut approximately $11 million worth of contracts and eliminated almost 60 of the health department's 7,700 employment positions in an effort to reduce spending, according to the governor's staff.

"They seem like they have gotten a handle on things a little bit better," Patrick Goldsmith, deputy commissioner of the Louisiana Division of Administration, said about the health department last week.

But Landry has also made choices that increased Medicaid spending by hundreds of millions of dollars annually.

At the urging of state lawmakers, the governor's latest budget proposal includes an extra $258.4 million to increase physician payments for seeing Medicaid patients up to at least 85% of the rates used by Medicare, the government health insurance program for seniors.

Harrington and Louisiana Surgeon General Ralph Abraham have said doctors must be paid more to treat Medicaid patients. Currently, Medicaid enrollees have trouble finding physicians because the program's reimbursement rates are too low. Medicare payments are typically higher, and doctors are more willing to take that insurance.

The governor also unilaterally raised Medicaid reimbursement rates by $22 million per year for seven smaller hospitals in rural areas, including four owned by Rock Bordelon, a Landry campaign donor and hunting buddy of Donald Trump Jr. Landry increased similar rates by over $40 million per year to University Medical Center in New Orleans.

The governor's team has also asked the federal government for permission to raise another physician payment that would allow more doctors to charge closer to a commercial insurance rate for seeing Medicaid patients.

This second round of extra physician spending hasn't been factored into the state budget yet. But if the proposal gains approval, it could add hundreds of millions of more federal dollars to Landry's existing Medicaid spending.

Overall, Louisiana's Medicaid budget is largely dependent on federal funds. Of the $19 billion Landry has proposed spending on Medicaid next year, $14.2 billion would be expected to come from the federal government.

For years, money coming from Washington was less likely to be cut than state funds, but Trump and congressional Republicans are eyeing Medicaid for significant reductions this year.

The House GOP is looking to siphon off as much as $880 billion from the health care program to help pay for tax cuts. Republican House Speaker Mike Johnson, who is from north Louisiana, and Trump have said they don't intend to cut Medicaid services directly, but experts say it would be nearly impossible to meet their spending goals without limiting the program.

Congress might be able to avoid making cuts to Medicaid directly by transferring more of its cost burdens to states. Louisiana would likely not be able to afford to replace a significant portion of its federal Medicaid money that is lost.

By comparison, the total amount of federal and state money Landry intends to spend on higher education, state police, the Office of Motor Vehicles and the prison system combined in the next fiscal year is $5.3 billion. It's not even half of the $14.2 billion in Medicaid funding the federal government is expected to provide.

Without the federal money, state officials would have to look at cutting optional Medicaid services, including those for people with disabilities, or lowering the reimbursement rates for physicians Landy is currently trying to raise, among other measures.

"I think states should be very worried about a cost shift from the federal government," said Kelly Whitener, an associate professor at Georgetown University McCourt School of Public Policy for Children and Families.

"If the federal government cuts Medicaid and cuts Medicaid significantly as they are considering, states are going to be ones that have to make the decisions about what services are going to be cut, what provider services are going to be cut," she said in an interview.

The Louisiana Illuminator is an independent, nonprofit, nonpartisan news organization.