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Manageable aid cut to hasten charity system demise

The Gov. Bobby Jindal Administration continues to make lemonade out of lemons, as the hit the state takes from Congress deciding to stop favoring it on Medicaid reimbursement provides another opportunity for the governor to push along the needed revamp of care to the indigent, and even finally wean the state off its inefficient model that makes government the primary provider of health care.

As head of the Department of Health and Hospitals 15 years ago, Jindal saw firsthand the tremendous inefficiency of a health care system based upon primary care provided large institutions – the country’s only such system where a number of state-owned hospitals provided this for those on Medicaid. Then as now dealing with a budgetary imperative, he began to wrench efficiency into the system, the process of which would continue under the oversight of others when he left the job, although very slowly if at all under the appointees of his predecessor to him as governor.

The pace picked up again when he became governor. Although he could created more efficiencies by making it smaller, the replacement for the state’s hospital in New Orleans, ravaged by Hurricane Katrina, at least was downsized from earlier versions in some recognition of the smaller role the state should play in direct provision of indigent care beyond that needed for its use as a teaching hospital. He also got the Legislature, which must approve of closures, to go along with closing the aging hospital in Baton Rouge, having its service performed by private providers contracted to the state.

While he seemed hesitant at times to abandon the money-goes-to-the-institution model, perhaps this was because of the politics involved of legislative involvement, particularly the populist uses of these facilities by some legislators who see them more as opportunities to claim they brought jobs to their districts than as part of a holistic health care strategy. After securing reelection, the reform pace quickened with the introduction of the Bayou Health initiative, where money follows the patient, still being rolled out that makes Medicaid more like an insurance service where private providers are expected to become increasingly the providers of choice for clients.

Some cuts came to these facilities earlier this year because of a mid-year budget correction. And now more and larger ones will as a result of the surprise action by Congress to strip extra and accidental funding the state had received from the federal government for Medicaid. (In fact, because of the complexity of the fiscal aspect of the program stemming from using the charity system for primary care, the state actually had the same basic thing happen, overcompensation, some years earlier but rather than not getting funds, it had to pay some back last year.)

To cope, the brunt of the reductions this time will come from the charity system, although some will come from other programmatic areas, even from Bayou Health plan administrators themselves. Notably, little relatively comes from private sector providers of Medicaid waiver services and, outside of government, mainly from the declining, over-capacity nursing home industry that already gets subsidized for empty beds, and non-state hospitals.

While the details are left to the governing agency of the hospitals, the Louisiana State University System, as state Sen. Dan Claitor deduced, the opportunity has presented itself perhaps to break the back of populist resistance to dismantling the charity regime. Cuts in services, some of low priority, others addressing more necessity but which will be curtailed in availability, will encourage the indigent to visit the more efficient providers outside of the government sector. This will make, with their existing infrastructures, the charity hospitals even less efficient in care provision than they have been. Eventually, this could lead to the shared recognition even among the big government holdouts in the Legislature that the proper number of state hospitals should be the pair primary designed for teaching, in New Orleans and Shreveport and the state could sell or lease the remainder.

As long as DHH takes care to make sure the additional flow of Medicaid clients through Bayou Health to non-government facilities is handled smoothly, there shouldn’t be much drop off in care. And in the long run, this should prove an excellent preemptive move to offset declining federal reimbursements to the state courtesy of the Pres. Barack Obama-inspired increased federal government involvement in health care, where state-run hospitals would absorb a disproportionate impact.

Increased efficiencies because of the better incentives for client behavior propagated by Bayou Health should minimize the impact of this funding decision, which sets the lowest reimbursement rate with Medicaid for the state in decades, and pushes ahead the chances at reform. All in all, there’s not much in the way of net negativity in this federal decision because of the state’s response, if it’s net negative at all.

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