Although most state agencies’ funding was cut during the legislative appropriations process, the FY 2000-01 expenditure level for the Department of Health and Hospitals (DHH) was increased by $139.4 million, or 3.3 percent over the FY 00 level. Nonetheless, DHH’s Table of Organization (T.O.) was decreased by 823 positions, or 6.1% for FY 01.

The following is a list of major DHH budgetary developments for FY 01:

As many as 800 DHH employees may be laid off, and some facilities may be closed because the $4.3 billion departmental budget is about $20 million less than the amount needed to continue services at the current level. The state may need to close some parish health units and substance abuse treatment centers due to the funding shortfall. DHH may also have to lay off employees who determine whether people are eligible for Medicaid. Losses from that group may prove to be especially difficult since DHH is under a court order to determine Medicaid eligibility in a timely fashion.

Nevertheless, the $3.5 billion Medicaid budget is on a sound financial footing. By raising new revenues, the Legislature guaranteed state funding for a large number of Medicaid services that were previously in jeopardy, including:

• Prescription drugs for persons over 21 who are not pregnant or institutionalized [$32.5 million in state funds];
• The medically needy program to provide health care to people who lack adequate health insurance and whose incomes make them ineligible for Medicaid [$5.2 million in state funds]; and,
• Restoration of a seven percent (7%) cut in Medicaid reimbursements to nursing homes and other private health care providers [$15.0 million]. Further, rates paid to private nursing homes were increased by a total of $14.6 million, financed by federal funds and increased provider fees;
• Also, a total of $5.5 million of the Medicaid budget was earmarked by the Legislature for small rural hospitals.

TEFRA was not funded, but a program to help severely disabled children was …

The Tax Equity and Fiscal Responsibility Act (TEFRA) program to help parents of severely disabled children at home was not funded. Instead, lawmakers voted to: (1) fund a low-cost flexible waiver program to help as many as 1,120 children with severe disabilities such as spina bifida and multiple sclerosis; and (2) make the Louisiana Children’s Health Insurance Program (LaCHIP) more accessible. Under this approach, combining the low-cost flexible waiver with the expansion of LaCHIP not only provides the state’s severely disabled children and their families with the most important health care benefits, but also ensures that DHH can control program costs by limiting services to the number of slots funded by the General Appropriations Bill.

The flexible, low-cost Medicaid Home- and Community-Based Services (HCBS) waiver program is considered a first step toward meeting the health care needs of an estimated 5,000 severely disabled children in middle class families. Under a regular TEFRA program, middle class parents of severely disabled children could get traditional government-assisted health care for their children under the Medicaid program. State officials, however, have resisted a full-blown TEFRA program in Louisiana to serve severely disabled children.

One reason is that such a program could cost as much as $50 million in state and federal funds within three years. Another reason is that whereas TEFRA allows only regular Medicaid services, many severely disabled children need the additional services available only through a Medicaid HCBS waiver, such as respite care and medication administration. Under the plan contained in the General Appropriations Bill, $3.0 million in state funds would match nearly $6.1 million in federal funds to implement a new $9.1 million health care program for disabled children of middle class families. This would not be a TEFRA program, although services would be similar. The program would provide medical and other health care services to disabled children up to $15,000 per year per child. The new waiver program is slated to start by January 15, 2001.

The household earnings ceiling has been raised to make more children eligible for LaCHIP, the state’s insurance program for poor youngsters. The program is currently open to children in households with incomes up to 50% more than the official federal poverty level. Instead of continuing at 150% of the poverty level, the General Appropriations Bill provides that households will be covered at 200% of that amount, making children eligible for state-paid health care if their families have incomes up to about $34,000 a year. LaCHIP’s outreach efforts are expected to add between 10,000 and 11,000 children to the program.

These additional children entering LaCHIP are expected to include 1,120 severely disabled children who would have qualified for full-blown TEFRA assistance. Under the plan contained in the General Appropriations Bill, $2.0 million in state funds will be used to match $7.5 million in federal funds to expand LaCHIP eligibility by a total of $9.5 million. It should be noted that the LaCHIP state match rate, at 20.67%, is lower than the HCBS match rate of 29.52%. As a result, expanding LaCHIP to provide services for some of the severely disabled population will result in a potential cost savings to the state since it will require fewer state dollars to generate LaCHIP federal funds.

Money for school-based health clinics has been included in the General Appropriations Bill at $5.8 million, an increase of $1.6 million over FY 00.

Charity hospitals were funded at 100 percent of the Governor’s Executive Budget. Still, the hospitals will receive about $6 million less than last year, which means a reduction of about 1%. All nine hospitals should remain open without layoffs. Earlier in the legislative budgetary process, proposed cuts threatened to force the closing of three hospitals in the Charity system, which treats Louisiana’s poorest patients and is the principal training ground for most of its doctors. By the time the General Appropriations Bill was enacted into law, virtually all of the threatened cuts had been restored. Nevertheless, the Charity system will be operating on a standstill budget of about $780 million during FY 01 since it must fund both merit raises for the system’s 9,800 employees and inflation out of the monies appropriated.