Quin Hillyer: Medicaid changes make sense, and they won't be bad for Louisiana

There is much to like and plenty to dislike about the misnamed "Big Beautiful Bill" signed into law on July 4, but the fearmongering about its provisions on Medicaid is unwarranted. Moreover, despite the doomsayers, Louisiana is especially well situated to avoid drastic repercussions.

In particular, a crucial protection for Louisiana came via language U.S. Sen. Bill Cassidy, R-Baton Rouge, was able to insert into the bill late in the process.

In general, the bill imposes new limits on something called "state-directed payments," a method by which states draw from federal funds to pay managed care organizations for Medicaid patients. The 28-word phrase added by Cassidy "grandfathers in" requests to the federal government, already in the pipeline when the bill was signed, for reimbursements at the previous, higher-allowable rate.

Louisiana had two such requests already pending, so the state likely will be able to garner the higher federal payments until 2028.

For many weeks, people agitating against the bill had cited what already were unfounded predictions that its Medicaid cuts would cost the state $4 billion annually. That amount already exceeded even the worst-case scenarios of respected observers such as the center-left KFF group.

Now, with the Cassidy language and other late Senate adjustments such as delaying implementation of other cost-cutting measures — almost none of which, by KFF's own account, are included in KFF's estimates — Louisiana is likely to break even in the near term. Longer term, Louisiana will have plenty of time to prepare for the coming changes.

Forgive a bit of policy wonkery, but to bolster the contention that Louisiana's "losses" likely will be rather minimal, it's worth understanding why Louisiana is well situated.

First, there's a complicated system whereby states use something called "provider taxes" essentially to game the system, bringing home much more in federal funds than the state's medical providers put up in the first place. This bill, quite rightly, ratchets down a state's ability to game the system quite so much.

But some states have been assessing provider taxes at a 6% rate, whereas Louisiana was assessing them at just 4.6%. As the ratcheting process is gradual, starting at that 6% rate and working downward, that means it will take several years before the top limit comes down to Louisiana's 4.6% (and eventually down to 3.5%). This provision, then, holds Louisiana harmless for quite some time.

Then, consider the abundant caterwauling about how rural hospitals would be forced to close because of this bill. The complaints always were excessive, but the Senate eventually negated a large portion of whatever concerns might have been legitimate. The law, as enacted, creates a $50 billion fund (spread over five years) to help keep rural hospitals open. The formula is complicated, but it will effectively provide poorer states such as Louisiana with more money per capita than wealthier states will get.

Back-of-the-envelope math says Louisiana, at just over 1% of the nation's population, could get nearly 2% of the rural hospital funds — meaning something approaching $1 billion total, or $200 million per year.

It was state Senate President Cameron Henry who, in somewhat vague and offhand remarks during an online conference, most widely popularized the overblown fear that Louisiana could lose up to $4 billion annually. With the final changes, though, Henry said "Louisiana is in good shape" because Sens. Cassidy and John Kennedy, R-Madisonville, "fix[ed] harmful provisions and protect[ed] our hospitals."

The most unjust criticism of the new law, meanwhile, was aimed at its "work" requirements for Medicaid. The final version of the bill solves one semi-legitimate earlier objection by delaying implementation of the new requirements until the end of 2026. This will give states 18 months to make the new system workable, without undue red tape.

Meanwhile, the requirements themselves aren't the least bit onerous. They apply only to able-bodied adults between ages 19 and 65, only to those with more income than the official poverty line, and only to those who aren't caregivers, who aren't pregnant, and who don't have dependent children.

To meet the requirements, one need only spend 80 hours per month in any combination of paid work, volunteer work, schooling or job training. These requirements, by the way, are far less stringent than the 120 monthly work hours required in the 1996 welfare reform bill that Democratic then-President Bill Clinton and Vice President Al Gore spent years touting as a good thing.

Meanwhile, at least three other tax incentives in the bill would make it easier for those leaving Medicaid to find insurance in the private market that likely would provide better care with more options.

Those are just the highlights of why the Medicaid-related critiques of the new law are wrongheaded. Other examples aplenty could show that the vast bulk of the Medicaid changes are not merely acceptable, but wise.