One of Don Gregory’s first calls after taking over the Medicaid program in Louisiana was from a woman worried about the health effects of having three X-rays in a week.
But for Gregory, who oversaw government health care for the poor until his retirement in 2012, the call epitomized the problems with a program that is the largest single expense in the state’s budget.
Medicaid has been growing so quickly — 51 percent during the Jindal years — that legislators are holding hearings to figure out why. Fiscal advocates are saying the size and growth of Medicaid is the reason why they think the naming of a new state health chief expected sometime this week will be the single most important appointment Gov.-elect John Bel Edwards makes as Louisiana’s new governor.
Gregory, who was Medicaid director at the time, recalled the woman had slipped on a fishing pier and broken her foot. Using her green Medicaid card, the woman sought treatment in an emergency room, which X-rayed her foot. She was sent for follow-up treatment to a physician, who also X-rayed her foot. Her foot was X-rayed again after the physician sent her to an orthopedic specialist.
Gregory couldn’t quit thinking that Medicaid, the joint federal-state health insurance program that Louisiana established in 1966, was going to have to pay for three separate X-rays to diagnose the same broken foot.
“And that’s the problem with Medicaid: There’s no coordination and there’s no incentive not to run the same test three times,” said Gregory, who now is a consultant for the Public Affairs Research Council of Louisiana.
Medicaid spending has grown so much since 2008 that when all the prodigious cuts to other parts of state government are added up — and adjusted for inflation — the eight-year total covers less than half the increased costs for doctors, hospitals, pharmacists and other providers of health care to the poor.
And state Rep. Julie Stokes, who made the calculations, said that’s only Louisiana’s portion of Medicaid expenses. The Kenner Republican is a certified public accountant who has been touring the state on behalf of the Committee of 100, a group of executives advocating structural changes to the state’s fiscal system to prevent recurring deficits.
The federal government kicks in almost two-thirds of Medicaid’s costs (62 percent). Yet, Louisiana’s $8.4 billion (38 percent) match amounts to more than a third of the state’s annual $25.1 billion budget.
“If we do not get on top of this, I predict that within five years we will be spending well over half of our budget on health care,” State Treasurer John N. Kennedy said last week.
Legislators have come up with ideas to curtail the growth, but there’s little wiggle room.
Paying providers less is not an option. State government already has cut those payments to the point that federal government warned against further reductions, said Jennifer L. Marusak, the vice president of governmental affairs at the Louisiana State Medical Society, which represents physicians.
“The problem is if you are Medicaid eligible and you utilize those services, the state has an obligation to pay for it,” said Lt. Gov. Jay Dardenne, who takes over as Commissioner of Administration — Louisiana’s main fiscal adviser — on Jan. 11 when Edwards is inaugurated.
About a quarter of the state’s population is enrolled in Medicaid. That ratio puts Louisiana high on the nation’s list, even among states that expanded their qualifications to allow more people to join Medicaid as part of the federal Affordable Care Act. Expansion would open the rolls to people in households making up to 138 percent of the official poverty level, a complicated formula but, generally, it’s a $33,465 annual income for a family of four.
The U.S. Census Bureau calculates about 11 percent of the families in Louisiana make between the current standard and the new one, meaning up to 500,000 new enrollees could join the 1.4 million already on Medicaid in Louisiana.
Gov. Bobby Jindal, who was running for president, and his legislative majority, repeatedly refused to approve expansion, arguing that it would saddle the state with unsustainable costs even with the federal incentives.
Edwards countered that health care would help the working poor better stabilize their family economics and keep them from slipping into poverty as easily.
Louisiana is not the only state struggling with higher Medicaid costs in 2015.
But elsewhere, much of the spending increases came in states that joined the Medicaid expansion, according to the Kaiser Family Foundation, the respected think tank on health care issues.
“Beyond enrollment, states reported that the other drivers of increases in spending were provider rate increases and the higher cost of health care, including prescription drugs.” Kaiser reported. But the impact on the states’ portions was less in states that expanded Medicaid — expenses went up 3.4 percent — than it was in states, like Louisiana, that did not — where expenses went up an average 6.9 percent.
Strong economies in most states were enough to mitigate the increased costs in Medicaid. But Louisiana’s economy is not strong — unemployment rates are higher than the national average and wages are lower — so the pressure from Medicaid is more acutely felt.
Playing a role in the uptick in Louisiana’s spending is the pressure of inflation for health care spending.
The federal Centers for Medicare and Medicaid Services expect an average annual inflation rate would increase Medicaid prices annually by 5.8 percent over the next decade. The national rate of inflation is about 1 percent per year.
The state Department of Health and Hospitals traces the increases to several reasons, such as paying hospitals to care for patients without insurance, for nursing homes, and for premiums for a segment of those on Medicare, which is predominantly a federal health care program for the elderly.
One of the chief reasons for higher costs is that more people enrolled in Medicaid — about 330,000 or 31.2 percent more since 2008, said W. Jeff Reynolds, undersecretary at the state Department of Health and Hospitals.
Another major factor is that while this growth was occurring, the federal government started trimming back its contribution — about 10.4 percent less, Reynolds testified to the Senate Finance Committee, which is holding a series of hearings, trying to get a handle on Medicaid spending.
It’s called Federal Medical Assistance Percentage, or FMAP, and is based on the three-year average of the state’s per capita income. Louisiana has one of the highest at 62.1 percent.
Senate Finance Chairman Jack Donahue, R-Mandeville, spelled out what that meant for Louisiana taxpayers: The state’s match to pay the providers of health care services nearly doubled, going from $1.5 billion in 2008 to $2.9 billion in 2015. During the same time period, the federal government’s payout rose only slightly, from $4.4 billion to $4.9 billion.
Louisiana has turned to a solution that 47 other states have adopted at one level or another: hiring private insurance companies to do the Medicaid work that previously had been done by government employees.
Under the traditional Medicaid system, the state employees would pay each doctor, hospital and other health care provider separately for the work they did. Since the private companies are paid a flat fee, they make money by coordinating the care between doctors, clinics and other providers, thereby limiting duplication.
In 2012, Louisiana contracted with five private companies. About 969,000 of the state’s 1.4 million Medicaid enrollees are part of the Bayou Health plan, to which the state has appropriated $3.2 billion.
It’s these contracts that many legislators have focused on to rein in spending. Most of the questions are about management and whether the state saved enough money to justify going private.
State Sen. Fred Mills, a Breaux Bridge Republican who sits on both the Finance and Health committees, is a pharmacist. He wonders if the big pharmaceutical companies are giving the same discounts to the Bayou Health companies that they would if just one entity negotiated on behalf all the state’s Medicaid patients.
“Maybe we should carve out the prescription drugs and use the buying power of the state,” Mills said.
The data isn’t available, yet.
“If we don’t know if it saved money, then we don’t know if privatization worked,” said Senate Finance Chairman Donahue, “… that would seem to be the crux of the matter.”
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