Medicaid privatization yields savings

The Jindal administration’s private insurance-based program covering about 900,000 Medicaid recipients is working to curb escalating health care costs, Louisiana’s health chief said Friday.

A new report indicates Bayou Health plans registered less cost than would have been incurred in the traditional state-run Medicaid program, state Department of Health and Hospitals Secretary Kathy Kliebert said. She said the savings amounted to a projected $29.55 per member, per month when compared to the most cost-effective of the private health plans.

“It doesn’t sound like much,” Kliebert said, “but when you add all our members ... it is significant dollars.”

Kliebert gave the financial update to the Joint Legislative Committee on the Budget and talked about program changes DHH is proposing to its operations.

Current contracts with five companies end in February.

Today, the state uses two models in its privatized Bayou Health program: one prepaid, premium-based, which is offered by three companies; and the other shared savings, with two companies receiving a small management fee and providers being paid directly for services.

The administration will move exclusively to the prepaid, premium-based plan. Kliebert said that program provides for more budget predictability. The companies get a flat, agreed-upon premium for covering health care expenses of enrolled Medicaid recipients.

She said the prepaid plan achieved greater savings when compared to the shared savings and traditional “legacy” Medicaid. A January to October 2013 analysis found prepaid costs to be $232.80 per member, per month; shared savings at $245.60 per member, per month; and projected traditional Medicaid at $262.34.

The numbers Kliebert provided were the first comparing the private insurance models with the more traditional “fee for service” Medicaid model.

House Appropriations Committee Chairman Rep. Jim Fannin asked for the comparison earlier this month.

The Bayou Health program covers two-thirds of the state’s 1.4 million Medicaid recipients, most of them pregnant women and children. The program started in February 2012. The administration promoted it as a cost saver that would improve health outcomes.

On Friday, Fannin said that as Medicaid costs rise, Louisiana government must come up with more state dollars to attract federal funds. The state must come up with about 38 cents of every dollar spent.

Fannin asked whether the state is mirroring the average national health care inflation rate of 5 percent.

“We are within that 3 to 5 percent range,” said DHH Undersecretary Jeff Reynolds.

“All programs across the country are growing,” Reynolds said. “Managed care simply deflects the growth curve down.”

Follow Marsha Shuler on Twitter @MarshaShulerCNB. For more coverage of the state capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog/