Kaiser Daily Health Policy Report Examines Action in Louisiana, Michigan and Texas on Medicaid Budget Gaps

The following summarizes recent proposals in Louisiana, Michigan and Texas designed to address increasing Medicaid costs.

• Louisiana: In response to a $200 million Medicaid budget deficit in the current fiscal year, state health officials proposed a budget last week that would cut payments to hospitals and nursing homes by 15%. Under the plan, payments to nursing homes would be cut by $78.7 million and payments to hospitals would be cut by $103.7 million, with large city hospitals and those with neonatal care services facing "steeper cuts" than smaller facilities. Rural hospitals with fewer than 60 beds would be exempt from the cuts. The budget proposal also would eliminate the $48.9 million Medically Needy program, which provides temporary Medicaid coverage to people whose medical costs have surpassed their incomes, and cut payments to facilities providing care to developmentally disabled individuals by $25 million. State Health and Hospitals Secretary David Hood said the budget is designed to focus on preventive instead of acute care. For example, the budget proposes an extra $20 million for home-based care for people with mental illnesses and would increase by $15.5 million funding for the Community Care program, which assigns Medicaid beneficiaries to a primary care physician (Ritea, New Orleans Times-Picayune, 5/10).
• Michigan: Gov. John Engler (R) on May 10 signed a bill that will increase Medicaid reimbursements for nursing homes and HMOs by assessing a quality assurance fee to draw additional federal matching dollars. Under the law, nursing homes will pay the state a $2.76 fee per day per bed, which is expected to generate $44.8 million and attract $55.7 million in federal funds. With the additional funds, the state is expected to increase reimbursements to nursing homes by 7%. HMOs will pay the state 1.9% of their premium revenues each year, generating an expected $54.6 million and $68 million in federal funding. The additional funds will be used to increase payments to HMOs by 5%. The fees are set to expire after five years (AP/Detroit News, 5/11).
• Texas: To cover increasing Medicaid costs, state Health and Human Services Commission officials have proposed changing the program's accounting procedures. Instead of listing expenses when care is provided, officials are proposing that expenses be listed when bills are actually paid, typically a month or two after treatment is provided. Such an accounting shift would result in a one-time deferral of about $225 million. The plan must be approved by the state Legislature, which resumes next year (Susswein, Austin American-Statesman, 5/10).