Ortego addressed the Baton Rouge Press Club, claiming the budget
assumptions are untenable. Jindal’s plan, already implemented with negotiations
among providers, is to contract out management of eight of the 10 state-owned
charity hospitals to nongovernment providers, who make lease payments. They
submit to the state for regular Medicaid reimbursement those people covered
under it. The state, using its own money (about a third under the current
formulaic calculation) and a federal government match (the remaining two-thirds
or so), reimburses at a set rate. But since the rate is low, in order not to
discourage providers from servicing this clientele, money up to a cap provided
by the higher Medicare rate additionally can be provided through a different
program known as the Upper Payment Limit where a similar matching strategy
occurs. The lease payments will be used as the state match. The Jindal
Administration calculates that this arrangement will save money as opposed to
the current system which shovels the UPL money directly to charity hospitals without
the benefit of a managed care approach that avoids reliance upon the open-ended
fee-for-service model.
Instead, Ortego’s idea would be to fold the ten institutions into
existing hospital service districts, which would run them independently. This
would expand their present duties of coordinating regional psychiatric care.
They may also acquire a portion of tax revenue streams, such as from the
proposed increased tobacco tax. This could be integrating into providing money
to the state, which by law must provide at least 40 percent of the match, to
get UPL funds.
Ortego maintains this is a better method because, he reportedly asserts, that these UPL funds will disappear in two years. From where that assertion comes from is unknown; there are no plans for the federal government to stop these, nor any plan by the state to not want to draw down on these. In any event, even under his arrangement, the public hospitals (which probably would have to be changed under Medicaid rules to a classification of “county” rather than “state” hospitals) still would bank on the UPL money.
Perhaps what he really meant and said – seemingly reported erroneously
one media outlet but correctly in another
– is that his strategy is better because it would rely more on UPL money than
on Disproportionate Share Hospital payments, which he claims the Jindal plan
would. DSH funds are distributed by formula to states on the basis of the
uninsured population proportion of use of health care in hospitals and its
federal match (which Louisiana is among the highest of all states). Unlike the
UPL where that is a FFS arrangement – documenting a Medicaid-provided service
triggers a UPL reimbursement for it – DSH payments are capped but are not tied
to a specific service rendering. And those
are scheduled to go down as the Patient Protection and Affordable Care Act
(“Obamacare”) kicks in, halved overall by 2019 and then an increase starting
thereafter.
Louisiana draws a disproportionate amount of DSH funding presently
because of its public hospitals. As anybody could waltz in off the street for
care near where they were located, this has tended to discourage individuals
from getting health insurance on their own, whether through Medicaid, and
artificially inflated consumption (make something free in consumers’ minds and
more of it will be used). Thus, it is argued, the reduction nationally also will
cut Louisiana’s share that could go to paying for this care, potentially
meaning additional state resources would have to be drawn upon to provide it.
While possible, it also seems unlikely. Department of Health and Hospitals
Secretary Bruce
Greenstein has
dismissed the notion, pointing out that the state does not nearly draw its
allotment available now, and that in the future because the state has refused
to go along with Obamacare Medicaid expansion in order to save at least $100
million a year, it will fare better under the DSH formula even if the federal government
interprets regulations in a way to punish states that refused expansion by a
disproportionate cutting of their DSH share.
A related issue is that a state may only have DSH funds comprise 12
percent of all medical assistance expenditures, so if Louisiana, through its Bayou Health
managed capitation health plans for Medicaid recipients (that is, the state
pays from its Medicaid allotment a monthly fee to coordinated care networks
that then pay all claims) or the shared savings plan (FFS but with ability to
share in savings). These should reduce (and are, according to initial reports)
increases to health care costs by greater efficiency, meaning DSH funds as an
overall proportion spent will increase. However, at a current 9.5 percent, the
increase should not be so much as to hit the ceiling perhaps anytime in the
future.
In addition, the cuts may never come about or be abbreviated. This is because
many other states have joined Louisiana in rejecting the expansion, potentially
making it politically impossible for the federal government to cut much if at
all, as the number of uninsured will be far larger than the assumption used on
which the planned cut was made. This is another reason why Obamacare’s
costs will exceed considerably the unrealistic projections by its fervent
supporters who claimed it actually would reduce overall health care costs.
By contrast, Ortego’s idea has a looming, serious implementation flaw.
With the continued roll out of Bayou Health, now
about a third of Medicaid recipients are in the capitation plans (and is
expected to go up to perhaps as much as half), and UPL money is calculated on a
basis
that discriminates against such systems. That is, the higher the proportion
of the Medicaid population in capitation plans, the less of that UPL money
disproportionately is available. As his plan relies on leveraging UPL money as
has been done, under current rules its effectiveness would be curtailed,
especially relative to a strategy based upon DSH money which does not require
such leveraging. That means more state money needed or districts find other
revenue sources, as he suggested they have the power to do.
The same aspect also impacts Jindal’s plan for its reliance on UPL
money, but to a lesser degree. Further, this can be dealt with what’s called a Section 1115 waiver,
which many other states have used for the same purpose when moving into
capitation regimes. Currently, Louisiana has this only to the extent
that it has provided for the outpatient clinic system around New Orleans put in
place after major hospital care disruption from the hurricane disasters of 2005
that expires at the end of the year.
That could also be applied to Ortego’s formulation, but why? Ortego
proposes continued government operation of these facilities, only with a
different face by creating another layer of bureaucracy. Why go to all the
trouble when you can get the same, and undoubtedly more efficiently, results
without having to invent more government?
Further, Ortego’s idea intentionally curtails an innovative aspect of
Jindal’s, by suggesting the forcible diversion of dedicated revenues to them
and by expanding the district’s authority to raise them on their own. This
would divert money from the state trying to oversee and coordinate its overall
health care expenditures in the same way that the traditional FFS concept gives
the state minimal control over resource usage and cost containment. It would
set up 10 fiefdoms free to manage as they wish, potentially at cross-purposes
to the state, and with the ability to raise taxes in their regions – meaning
for the citizenry the plan becomes even more expensive relative to the Jindal
plan. (And then there's the inevitable politics involved in governance.)
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