Senate Finance reviews $21.4B LDH budget; Medicaid managed‑care growth and maternal‑health initiatives highlighted

The Senate Finance Committee on March 25 received a full briefing on the Louisiana Department of Health's FY2026 recommended budget of roughly $21.4 billion, driven primarily by Medicaid expenditures and federal funding. Department leaders highlighted managed‑care cost growth, nursing‑home rebasing, maternal‑health work and ongoing compliance needs tied to the Cooper‑Jackson settlement.

Heather McKnight of Senate Fiscal Services opened the LDH briefing with a structural overview: LDH spans 21 agencies, including Medicaid administration, public health, behavioral health and the human services authorities/districts — local governance entities that provide community behavioral health services. She said Medicaid represents the single largest expenditure area (about 89% of total LDH spending when isolating Medicaid programs) and that federal funds are the largest source of revenue for the department (about 71% of means of finance); State General Fund comprises about 15%.

Drew Maranto, interim Secretary of the Louisiana Department of Health, described the administration’s priorities in a comparatively “flat” FY2026 recommendation that stresses mandatory increases and targeted investments. "We need to raise our expectations and expect excellence," Maranto told senators, saying the SGF increase for LDH is modest (roughly 2.43%). He noted three material state‑fund drivers in the proposed budget: a nursing‑home rebasing adjustment (about $32.5 million), Medicare Part D clawback growth ($17.6 million) and Medicare Part A/B premium increases for dual eligibles (about $16.3 million).

Ralph Abraham, the State Surgeon General, reminded the committee how the COVID‑era enrollment surge has begun to unwind: Medicaid enrollment peaked during the public‑health emergency and has declined toward pre‑PHE levels, though an expanded enrollment cohort remains larger than pre‑pandemic. He emphasized the department's focus on returning systems to steady operations and improving outcomes.

Major Medicaid adjustments and program notes: - Medical vendor payments (the account that actually pays Medicaid claims) is budgeted at roughly $18.9 billion for FY2026. LDH reported a managed‑care growth adjustment of approximately $1.2 billion in total funds to reflect projected enrollment, PMPM changes, utilization and pharmacy rebate changes. McKnight said that the net general‑fund impact of the managed‑care adjustment is small (the MCO adjustment increases federal and trust‑fund sources more than it increases SGF). - The department requested $258.4 million (total funds) to raise physician reimbursement toward 85% of Medicare in FY2026 as part of a statutory plan to reach 100% of Medicare in later years; the transcript lists $22.3 million SGF for that increase and larger amounts of trust and assessment financing. - Nursing‑home rebasing and inflation adjustments are included (about $105.4 million total funds, with a significant SGF component) as required periodically by state law. - A $31.7 million transfer from Medicaid to the Office of Behavioral Health (OBH) moves state general‑fund dollars into OBH to fund services tied to the Cooper‑Jackson settlement and forensic services.

Senators questioned the department on several operational fronts: hospital directed payments and the directed‑payment financing structure, the Managed Care Incentive Program (MCIP) and whether incentive dollars reach hospitals rather than administrative overhead, and maternal‑health outcomes and access to OB‑GYN care in rural parishes. Deputy Secretary Pete Krogan said the department has prioritized maternal health and has awarded new grants (including a CMS Transforming Maternal Health Model award) and planned initiatives to improve prenatal screening, perinatal care standards and post‑discharge supports — including naloxone distribution and post‑discharge linkage for mothers with substance‑use disorders.

Office‑level highlights in the presentation: - Office for Citizens with Developmental Disabilities (OCDD): the budget anticipates roughly $224.6 million and 1,679 positions for DD services; OCDD and advocates continue to press for rate and workforce changes to support direct‑support professionals. The department said there is not a single, global waiting list for waiver services but rather prioritized offers; it said urgent and emergent needs are addressed first. - Office of Aging and Adult Services (OAS): LDH noted 11,000 people on the wait list for certain long‑term services and that Villa Feliciana and other state facilities require staffing and financing adjustments; the agency converted some state general fund to interagency‑transfer funding where administrative match is available. - Office of Public Health (OPH): LDH recommended reductions to reflect expiring COVID grants and reallocated funding for public‑health priorities; OPH will absorb some federally mandated water‑system monitoring costs. - Office of Behavioral Health (OBH): the department budget adds funds to maintain compliance with the Cooper‑Jackson settlement, funds forensic services and reallocates $31.7 million in state general fund previously placed in Medicaid.

On federal grants and short‑term funding risk, OBH staff told the committee that LDH had received notification shortly before the hearing of the termination of several temporary grants (substance‑use and mental‑health grants). The department was still assessing the programmatic and staffing impacts; senators asked LDH to notify the committee promptly when funding changes are confirmed so legislators can assess consequences for FY2026 plans.

Why it matters: Medicaid drives most of LDH's budget. Changes in enrollment, federal match, provider payments and directed‑payment financing can materially change state general‑fund needs and influence access to care in rural communities, long‑term care settings and behavioral‑health systems. Senators indicated they expect follow‑up on MCIP metrics, hospital‑directed payments, maternal‑health access in rural parishes and the fiscal impact of any confirmed federal grant terminations.

Ending: LDH committed to provide additional data requested by the committee, including managed‑care detail, MCIP metrics and more granular reporting on hospital directed and physician directed financing. Senators asked for ongoing off‑cycle briefings to track urgent developments ahead of the appropriations process.