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Success on Jindal health plan also can help budget woes

It is all interconnected, the balancing act Gov. Bobby Jindal is trying to pull off as state revenues look to underperform and state expenditures, basically Medicaid, prepare to overperform. He has to get it right or practical and political ramifications will be substantial.

Naturally the state’s current and looming budget deficits have dominated headlines for the past week, even as surrealistically a surplus came about for last year.. Problem is, that surplus cannot directly be used to offset this year’s or the predicted deficit. As has been suggested previously, the best use of the surplus would be to boost the Budget Stabilization Fund, which would comprise about 60 percent of it. And while paying off debt and then using interest savings with the remainder also would generate some more short-term cash to offset the future deficit, perhaps a better strategy would be paying down unfunded accrued liabilities of state retirement systems to reduce huge expenditures in the next two decades.

But aggravating spending over the long run will continue unless the single biggest portion of the biggest item growing at the fastest rate continues, and that is Medicaid spending on the poor and indigent. This week, Jindal got a significant victory with legislative approval to allow him to bring to the federal government a coordinated care plan that would introduce private sector aspects to the system that promise to hold down costs.

This came despite two different forces who oppose the plan. One comes from physician organizations which would prefer the fee-for-service model because it better serves their interests. The new plan would reduce providers’ abilities to make nonessential and/or duplicative charges and thereby also their revenues. It additionally would force more attention to be paid regarding their own practice management which some would prefer not to do.

The other, represented by the only dissenting legislative committee vote of state Rep. Karen Carter Peterson, objects because Jindal’s plan disempowers government too much for its liking. The current fee-for-service arrangement, where government pays whatever reasonably is billed, puts everybody but the health care consumer in charge and encourages no efficiency. Jindal’s plan, developed by Health and Hospitals Secretary Alan Levine who supervised a similar reform in Florida, introduces market forces with competing nongovernment administrators. This is in contrast to rumblings coming from Democrats in Washington who now control both majoritarian branches of government and campaigned on providing national universal health care.

Peterson commented that the process was too rushed, even though legislators were not being asked to make a commitment and many options were open. The implication was this plan was trying to get approval before Democrats essentially could force a plan onto states that had no free-market mechanisms to it, as it would be more difficult for them to dismantle these kinds of programs (which more and more states are turning to) oncethey were put into place. Particularly dangerous to their perspectives is that Jindal’s plan has elements of universal coverage in it, making it politically difficult to turn down half a loaf.

However, while a rearguard action of the likes of Peterson’s would slow things down for nothing more than political reasons, the fact is it is highly unlikely that in less than a month the federal government will be able to act on and approve the waiver anyway. The real concern is that with the new administration coming in, months will pass before positions are filled where these kinds of decisions can be made and that threatened to push back the intended launch date a year from 2010. By having lower-level bureaucrats start immediately on approval, that could save several months, and Democrats still would get a chance to approve or not.

Jindal is being particularly crafty with his introduction of the elements of universal coverage, and not just because it can win approval for a free market-oriented plan. Because of past shenanigans, the state owes $771 million to the federal government for Medicaid overcharges. Jindal has proposed waiving that if the state plows that into a phase-in of universal coverage, and also makes for a more compelling case for the efficiencies from the free market elements to be introduced in order to keep overall costs down. One must be there for the other, and without either, as Levine has preached constantly, costs will continue to spiral without any improvement in coverage or service.

The timing is everything because while Jindal probably can come up with stopgap measures to take care of this next fiscal year’s deficit, with no attempt to control Medicaid spending future year deficits will create a chronic budget problem. So not only does Jindal have political stakes attached to Medicaid reform for its own sake, but also to help mitigate potential future budget woes. With legislative approval, given the confluence of political forces in these times of transition, he may have started playing a winning hand.

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