that's pretty much what he says, but I'm not sure he means them literally.
By "kid" he means someone significantly younger than himself who think they know everything or that they shouldn't respect him and don't know their place (by his reckoning) - still adult in age, otherwise they wouldn't have been sharing the facilities with him.
He may not literally mean "f**ked in the a**" either - it's sometimes an expression meaning he got the better of them or got the upper hand with them. Although if he did mean it literally - well, to use one of Frank Vincent's often quoted lines in another mob masterpiece , in prison, you have to compromise. The fact that he could have his way with "kids like that" simply shows he could dominate them and that they were nothing to a real gangster like him.
Just a bit of trivia but the real life reason Tommy and Jimmy killed Billy Batts is because Jimmy had taken over his businesses while he was in prison. And he didn't want to give them back.
From how Batts presented himself in the bar I always felt he was one of those guys that talks a lot of shit but never follows through with his threats, at least not man to man and personally, most likely having his goons take care of his dirty work for him.
The “fuck kids like that in the ass,” quip was just wanna-be tough guy smoke, Batts was all talk.