Facing a budget shortfall partly caused by ballooning Medicaid costs, Louisiana Republican Gov. Bobby Jindal has proposed a fundamental reform of the state’s Medicaid system. Yet opposition from some in the legislature, including outgoing Republican House Speaker Jim Tucker, could doom the reform plan.
Overuse of ERs
Louisiana has a financial incentive to reform the way it provides Medicaid services, but also a need to improve outcomes. The state’s health system currently ranks in the bottom five in numerous health categories, including infant mortality and cancer deaths. According to Louisiana Secretary of Health and Hospitals Bruce Greenstein, a major reason is that Louisiana residents historically have been discouraged from developing relationships with primary care physicians and preventive care physicians such as OB/GYNs.
“In Louisiana, we have for a long time had a culture of using the emergency room as a substitute for a primary care physician,” said Greenstein. “A significant part of Louisiana’s population does not even have a primary care physician.”
Greenstein says that ever since legendary governor Huey Long established a network of charity hospitals, Louisiana’s Medicaid population has developed a habit of thinking all illnesses requiring doctor intervention should be treated at the emergency room.
“We have a fundamental problem in Louisiana with our Medicaid population not receiving care in appropriate settings,” Greenstein said. “Medicaid pays for one-year wellness visits for children, but not adults. As a result, most adults never develop a relationship with a primary care physician—children, diabetics, asthmatics, and people with other chronic problems aren’t getting the preventative care that they need. They tend to just take themselves to the emergency room over and over again.”
Follows Other Reform Attempts
Louisiana has previously attempted reforms to address this problem. The first reform proposed by the Jindal administration was the “Community Care” program, which paid primary care physicians $3 per member per month for agreeing to serve the Medicaid population with the goal of encouraging patients to develop a relationship with a primary care provider.
“The program met with mixed results,” said Greenstein. “So on January 1st of 2011, we transitioned to a pay-for-performance model.”
Jindal’s administration reduced the flat fee payment by half and added bonuses for primary care physicians who met certain goals, including fewer ER visits among their population, keeping their clinics open later, and allowing Medicaid patients to schedule same-day appointments.
Moving to Managed Care
While still evaluating the effectiveness of these reforms, Jindal is proposing further steps—including transforming Louisiana’s Medicaid system from a straight “fee-for-services” model to “coordinated care networks” managed by private insurance companies, following a model already established in 36 other states.
“Private insurance companies have tested means of managing costs and ensuring that care is given to plan members in appropriate settings,” said Greenstein. “We engaged a private independent firm who analyzed the costs, and based on the actuarial tables, we believe transitioning Louisiana’s Medicaid population to coordinated care networks would result in savings of $8 million in this year’s budget, and $135.9 million in next year’s budget.
“These savings would be the result of slowing the rate of increase for the cost of the Medicaid program, and the saved cost of not having to administer the fee-for-service model,” Greenstein explained.
Competition between private insurers would be a cornerstone of Jindal’s plan. The state would be split into three regions, each served by two competing private insurers; Medicaid clients would always have a choice between two providers.
Disagreement in Legislature
Greenstein says the main hurdle is selling the necessity for one-time transition costs—which could take several months—to a skeptical legislature under political pressure to cut every dollar possible.
“Under the fee-for-services model, we have been paying claims as they come in at the end of every month. With a phased-in implementation, we will have to pay the private insurance companies up front to manage the state’s population,” Greenstein said. “And even after we transition to the coordinated care networks, we anticipate that we will have to continue to pay fee-for-services claims for some time.”
Instead, Rep. Tucker (R-Algiers) is pushing to cut approximately $59 million from the state’s general Medicaid fund, plus the approximately $20 million Jindal has set aside to pay for the transition to coordinated care networks. Including federal matching funds, this would cut Louisiana’s annual Medicaid budget by approximately $260M. However John Graham, director of health care studies at the Pacific Research Institute, says this approach sacrifices quality and access.
“It is vitally important for every state to get Medicaid spending under control,” Graham said. “Many states have succeeded in transferring some of the risk of Medicaid spending from taxpayers to managed-care plans. Managed-care plans can also better serve patients with chronic conditions, of which there are a lot in Medicaid.
“Rather than simply attacking Gov. Jindal’s proposal to innovate, critics should focus on ensuring that the state’s contracts with managed-care plans are transparent and that the plans get rewarded for delivering results,” Graham added.
Auditng Program Planned
Greenstein said Louisiana would institute a rigorous auditing program ensuring real cost savings, of which the state would keep 60 percent while the private companies would keep 40 percent. He estimates the legislature’s alternate plan for cuts would have a significant negative effect on Medicaid patients.
“If the legislature’s cuts are implemented, we will have to cut provider reimbursement rates by approximately 7.4 percent,” Greenstein said. “The effect of this will likely be a reduction in the available network for Louisiana’s Medicaid patients.”
Leon H. Wolf ([email protected]) writes from Nashville, Tennessee.