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Develop health plans in the open, PAR says

Click here to download a copy of PAR’s On the Health Record newsletter.

The Louisiana Department of Health and Hospitals (DHH) has proposed a revamp of the way Medicaid services are delivered in Louisiana. This latest proposal has been met with stiff resistance from a wide variety of stakeholder groups concerned that dollars currently dedicated to patient care would be diverted to fund corporate profits at private health care management companies making up the new coordinated care networks.

Serious concerns have been raised about DHH’s proposed Coordinated Care Network (CCN) plan. Instead of quickly pushing through un-vetted plans, PAR urges DHH and the Legislature to move quickly to establish an open process for inclusive and public debate about the state’s latest CCN plan and plans for implementing all aspects of federal health care reform.

The administration’s tendency thus far has been to develop health care policy changes with little input from health care providers and the public, leaving scant time for final decisions and public debate on important policy matters. For example, DHH recently requested a state Senate Health and Welfare Committee oversight hearing to approve an Emergency Rule that would establish a Medicaid managed care program that would utilize CCNs. A meeting was scheduled to hear the proposal on Oct. 21, but it was cancelled in response to stiff opposition from provider groups who felt the plan was being pushed through without adequate public debate. DHH Secretary Bruce Greenstein has rescinded the rule change for now.

Another meeting of the Senate Health and Welfare Committee has been scheduled for Oct. 28. It is not expected that legislators will be asked to approve a rule change in association with the CCN at the upcoming meeting; rather the agenda shows only that they will be briefed on the plan. This is a prudent approach and one that should be embraced as a standard step in the process for implementing reforms.

The CCN plan has similarities to the unsuccessful Louisiana Health First plan from the fall of 2008. However, there are also a number of differences this time, with the most prominent being much broader opposition to the plan itself. Organizations contesting the proposal have grown from a single association representing pediatricians in 2008 to a group of five major health care associations representing both physicians and hospitals that have formed the Coalition to Protect Louisiana’s Healthcare.

DHH’s current version of Medicaid remodeling proposes to implement the most troubling aspect of the 2008 Louisiana Health First plan – converting from fee-for-service payments to managed care without proper safeguards in place. The focus of the current plan is to outsource management of medical care for some 844,000 Medicaid recipients to private insurance companies. The rationale for the CCNs is that the current program, called CommunityCARE, is broken, with deficiencies in care coordination, quality, specialty access and a reimbursement system that rewards quantity rather than quality.

Projections from Mercer Consulting, actuaries hired by DHH, show that if CCN is implemented, a total of $50 million for FY 2012 would be saved. That number represents slightly less than 1 percent of the total Medicaid budget (minus federal funds for hospital care for the uninsured). Savings for FY 2013 are projected to be $71 million, or only 1.3 percent of the total budget.

Although the CCN plan may not be a panacea for the state budget, it is being touted as a high-profit opportunity for Wall Street investors – which raises serious concerns about the wisdom of this approach. A report (“Highlights from the Louisiana Medicaid RFP”) produced by Citigroup Global Markets in early October says the “Louisiana opportunity is the next big catalyst for Medicaid” and is expected to produce $2 billion in revenue annually for major insurers in the Medicaid market.

The report found several features of the CCN plan particularly attractive for investors. The first is the absence of an RFP (request for proposals) by the state, which will instead allow any plan meeting minimum requirements to participate. Another highly favored feature is the absence of a required medical loss ratio, defined as the minimum amount of the Medicaid premium paid to the insurer that will be spent on medical care for those enrolled in the plan. The medical loss ratio also measures administrative costs and profits. These factors suggest a free-wheeling approach to managed care and one that lacks adequate safeguards.

Medical loss ratios have received much attention recently because national health care reform has a provision that calls for minimum ratios of 85 percent for large business plans and 80 percent for individuals and small businesses. Most Medicaid managed care plans maintain ratios in the 80 percent to 85 percent range, though there are cases of ratios as low as 60 percent or less, which in at least one case prompted a lawsuit by the state agency.

The new DHH business plan (“A Road Map for a Healthier Louisiana,” released Oct. 25) correctly notes many of the problems that impact Louisiana’s delivery system and its low overall health ranking. These include a broken federal Medicare program that in 2006 had the highest cost and the lowest quality in the nation; an antiquated charity hospital system badly in need of an overhaul; and a fragmented system of private health care that suffers from the same well-documented problems that plague the entire nation.

Yet, other options besides CCNs should be considered by DHH and the Legislature before any decision is made to move forward with significant changes for Medicaid. The North Carolina model, for example, is a very successful program that could be adapted to Louisiana to establish a better system of medical homes and care coordination. The litmus test for a viable program is one in which the provider community feels comfortable and is committed to the hard work and difficult changes needed to build a better system of care for Louisiana.

PAR recommends the following before any action is taken on the new DHH CCN plan.

Recommendation 1

The legislative Health and Welfare committees preemptively should request that DHH undertake a rewrite of its CCN plan to ensure that, at a minimum, the following items have been corrected:

The traditional RFP process should be used to select potential plan participants in lieu of “any willing health plan” that meets minimum requirements.

A minimum medical loss ratio should be established at the 85 percent level in concert with the federal health care reform law, and plans should be directed to adhere strictly to that. Provisions should be included that describe how plans that fail to maintain the minimum are to return money to the state.

Recommendation 2

The Joint Committee on Health and Welfare should undertake a comprehensive and thorough study of the viability of different models of Medicaid service delivery that have achieved success in improving care coordination, enhancing quality and reducing unnecessary utilization and costs, including administrative costs. The committee should hold open meetings to solicit input from a wide variety of stakeholders, to include providers, consumers, health plans and other interested parties.

The committee should produce a report that outlines the material reviewed during the study process and also should make recommendations to the governor and the full Legislature as to the most viable ways to achieve a better Medicaid delivery system for the state. The implications of federal health reform and how it should be coordinated with state efforts should be a high-priority focus of the study.

Recommendation 3

The governor should immediately by Executive Order establish a permanent commission to hold public meetings and conduct studies to determine how best to implement the provisions of the federal health care reform act. The commission should be advisory only and should make recommendations to the governor and DHH. The commission should solicit information from the public, including providers, consumers, health plans and other interested parties. The commission also should solicit input and provide recommendations on coordination of federal health reform with state-level reform activities, such as the CCN program proposal. The commission should make all meetings and documents easily accessible by the public.

PAR has released an edition of its On the Health Record newsletter that more fully explains concerns with the proposed CCN plan. The newsletter is available at



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