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PAR Recommends More Oversight of Louisiana’s New Bayou Health Medicaid Managed Care Program

CONTACT: David Hood – Senior Healthcare Policy Analyst (225) 268-1974

The Public Affairs Research Council of Louisiana (PAR) announces the release of a report on Bayou Health, Louisiana’s new program that will allow private companies to manage the care for nearly 900,000 Medicaid recipients, mostly children, starting in 2012.

Checkup on Bayou Health: What Louisiana Needs to Know About Medicaid Managed Care Privatization examines the state’s initiative to place about two-thirds of the state’s Medicaid population and more than $2 billion in annual health care spending under the responsibility of privately managed Coordinated Care Networks. Similar Medicaid privatized managed care systems have been adopted by many states and rejected by some others.

PAR’s report recommends the Legislature take the lead in providing oversight of this program by establishing a special committee or commission on oversight of state and federal health care reform. Oversight bodies for health care reforms have been established in most states. The purpose would be to establish a year-round focus on the reforms and to verify their impacts on spending, health care service providers and patient outcomes.

“As the administration embarks on an ambitious Medicaid reform program and federal health care law is implemented, how will we measure success or failure for these programs and who will publicly evaluate those measures?” PAR President Robert Travis Scott said. “While the state health agency is taking the primary role, a well-focused oversight commission independent of the administration would help verify the results. Verification can build public trust and identify problems.”

The privatized Medicaid managed care model is based on the theory that private companies can makeup-front investments in data infrastructure, patient education and disease prevention while providing health care that will yield savings for the state and profit for the companies. One concern about the model is that some private companies in other states have attempted to increase profits by reducing necessary health services to Medicaid recipients.

“The time has come for strong legislative oversight for a program that deserves full scrutiny,” said David Hood, the author of the report and a former secretary of the Louisiana Department of Health and Hospitals. “A public spotlight on all major issues about the CCN program is needed on an ongoing basis to ensure that potential problems are detected and addressed in a timely manner.”

Privatized managed care elsewhere has received mixed reviews. Some states have found savings and improved health outcomes for patients while other states have wrestled with fraud and unexpected demands by private companies for higher rates of compensation. Some states have tried the model only to bring care management back under state control. Many states use a hybrid approach of privatizing managed care for certain populations while letting government staff manage care for other populations.

The key public policy issue at this juncture is the need for effective over¬sight, accountability and program authority, especially given the public dollars involved and the impact on citizens.

The financial performance of the model should be closely monitored. Under the current system, Louisiana Medicaid spends among the least in the country on a per-enrollee basis, ranking 48th on spending per child and 41st on spending per person for all enrollees compared to other states. That relatively low rate of spending could be a poten¬tial impediment for Coordinated Care Network companies seeking to cut health care costs through efficiencies and lower expenditures on enrollees while also finding room to make a profit.

The Bayou Health program by design is supposed to trim a portion of the state’s Medicaid budget even though some of those expenditures will be used to cover a major new cost factor: administrative costs and profit for the private insurance companies with a CCN contract. Meanwhile, overall spending on actual health care services for these Medicaid patients is expected to decline significantly. What this means for the future is that state officials and the Legislature must consider whether reduced spending on health care comes as a result of more efficient operations and a reduction in unnecessary services or a cutback in health care services truly needed by Medicaid recipients.

PAR recommends:

•1 The Legislature should assert its authority and take the lead in providing oversight of this program by establishing a special committee or commission on oversight of health care reform with bipartisan membership from the House and Senate and other stakeholders.

•2 DHH should ensure that the state maintains the authority and control of systems and processes and that all private managed care companies operate in a transparent manner. Companies should be held to the same standards as state agencies in terms of public records related to the Bayou Health contracts.

•3 DHH should adhere to the federal definitions of “medical care” and “administrative costs.” Some managed care plans have creatively redefined certain administrative costs as medical care to maximize profits and over¬head. DHH should remain vigilant that any redefinitions are transparent and in the best interest of citizens.

•4 The Legislative Auditor should monitor the impact and effectiveness of the Coordinated Care Networks and be given access to information to perform its analysis and report its findings to the Legislature.

Although this study identifies potential areas of concern and the need for more legislative oversight, PAR strongly encourages Medicaid recipients – especially eligible families with children – to learn about their options under the new Bayou Health program and to select a plan as soon as possible that is best suited to their particular needs. Bayou Health has the best chance of succeeding if Medicaid-eligible people step forward and learn how to participate in the program. The new system is beginning enrollments and qualified citizens should get on board. Health care providers and Medicaid enrollees are encouraged to become educated about the program so that they can make informed decisions about their participation by visiting the website www.bayouhealth.com. The report can be found at PAR’s website at www.la-par.org/Publications/PDF/PAR_HealthcareReport.pdf.

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