SADOW: Ortego Touts Plan To Make Health Care Funding Problems Worse

Journalists’ knowledge about public policy typically is like farm land during the Dust Bowl era – acres in coverage area but not even an inch deep. So it comes as no surprise when a gaggle of them showed up to hear state Rep. Stephen Ortego pitch an alternative, government-centric plan for provision of indigent and uninsured health care to that outlined in Gov. Bobby Jindal’s recently-submitted budget, and that they seemed unable to probe deeper to uncover the practical and theoretical problems with it that make it a poor substitute.

Ortego addressed the Baton Rouge Press Club yesterday, claiming the budget assumptions are untenable.

Jindal’s plan, already partially 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.

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 and the state hasn’t given any evidence that it plans to stop drawing on them. 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 by 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 is what he claims the Jindal plan seeks to do. 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 (for which Louisiana is among the highest of all states). Unlike the UPL where that is a fee-for-service 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 at a local “Charity” facility, this has tended to discourage individuals from getting health insurance on their own, – whether through private insurance or through Medicaid – and thus has artificially inflated consumption (when you make something free in consumers’ minds, 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, this 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. With Louisiana’s Bayou Health managed capitation health plans for Medicaid recipients, the state pays from its Medicaid allotment a monthly fee to coordinated care networks that then pay all claims. These should reduce increases to health care costs through greater efficiency (and early indications are that it’s working), 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. 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 rollout 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 efficient, 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.

All in all, Ortego’s plan addresses a nonexistent scenario in a more expensive way. No legislation has been prefiled, but as expressed through media interpretations of his remarks, if introduced it will be a deserved legislative nonstarter.



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