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30.11.10

Compromises make LA Medicaid plan even better

The compromise struck by Louisiana’s Department of Health and Hospitals Secretary Bruce Greenstein in reworking facets of Medicaid reforms in the state does the job in promoting efficiency in delivery of health care to indigent families with children as well as giving providers greater choice in how they want to participate in the system.

At the beginning of the month, Greenstein would have eliminated by the end of the month the CommunityCare program. It paid $3 per patient per month for doctors to coordinate care for Medicaid recipient children but wasn’t showing much in the way of positive outcomes, and thus was a logical candidate to discontinue in search of budgetary savings.

But after complaints about its removal from organizations of providers, Greenstein decided to mend rather than end. His new proposal is to cut the rate in half but then add incentive payments if outcome benchmarks were achieved that would raise the rate to a maximum of $4.50 a month. This solved the problem of providers pocketing the fees with little to show for them.

Greenstein also provided another option in managing the system. Originally, the system was geared towards insurance companies providing coordinated care, but some providers thought they might take too much revenue for themselves and not leave enough for quality care. Thus, Greenstein enlarged the eligible managerial entities, permitting providers to form their own care networks and administer their plans themselves. Regardless of who managed, performance standards for outcomes would have to be met or as much as half the state’s reimbursement could be withdrawn.

However, some providers have complained about these changes as well, preferring a fee-for-service system that does not control for overutilization nor promotes efficiency but does transfer maximum dollars into providers’ pockets. Savings are supposed to come from better care meaning reduced accessing of health care services by the indigent, and there is some evidence to suggest this, but the problem is the economies of scale required to make it work, requiring huge expansions of the population eligible, cause enormous total expenditure increases. This was witnessed in North Carolina, a wealthier state than Louisiana, which is having to institute major cost controls in the program in these times of budgetary stress for most states. Such an approach would wreak even more havoc to the budget of a poorer state such as Louisiana.

Correctly, Greenstein is trying to meld specific aspects of this philosophy into the one the state is pursuing to bring about more efficient Medicaid service provision, the use of market forces rather than state control to lower costs and improve quality. Some providers are upset because they will have to show that what they do actually works rather than have taxpayers hand them blank checks. If it comes to that, taxpayers’ preferences must take precedence.

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