DHH Announces Reduction Plan to Address Drop in Louisiana’s Federal Medicaid Matching Rate

Today, the Louisiana Division of Administration and the Louisiana Department of Health outlined a plan to address the budget shortfall resulting from Congress's action that resulted in a decrease to the state's disaster-recovery Federal Medical Assistance Percentage (FMAP) rate from 71.92 percent to a projected 65.51 percent - the rate represents the lowest reimbursement rate Louisiana has had in more than 25 years.

For Fiscal Year 2013, the decrease equates to a total impact of approximately $859.2 million, which equates to approximately $287.1 million in state general funds.

"We built our budget based on the Medicaid matching rate published by the federal government," said LDH Secretary Bruce D. Greenstein. "While that rate has now changed, our focus remains on ensuring the people of Louisiana have access to quality health care services in the most effective, efficient and sustainable way possible. We are proud to say there will not be reductions to essential services."

Greenstein added, "We've already enacted major system transformations in the way health care is delivered. We've gone through several rounds of provider rate reductions. We've consolidated numerous facilities and services, reduced thousands of positions, and sought countless program and service efficiencies - all with minimal impact to services.

"The bottom line is that we have undertaken wide-ranging structural reforms in terms of both service delivery and cost savings, and it is absolutely imperative that these reductions continue to be applied in the most strategic and precise manner across the Department's entire budget."

The plan announced today will reduce $193 million of the $287 million funds the state is losing as a result of the reduced FMAP rate. Based on consultations with economists, there is a strong likelihood of a General Fund revenue boost for FY 12 that would produce enough money to cover the balance of the funding loss. If that additional revenue does not materialize, LDH will have to implement more reductions, but would still have more time to transition.

Commissioner Paul Rainwater said, "From the beginning of this administration we have dramatically reformed and restructured government, shrinking government and making it more efficient and sustainable.  LDH has been a tremendous leader in that effort, and with this plan today it continues to focus strategically to balance delivery of service with sustainability."

The reductions are outlined below by office.

Office of Public Health ($383,333 SGF; 12 TO). The closure of eight Vital Records Service Centers across the state will continue OPH's move to a more modernized method of issuing certified copies of Louisiana birth certificates, birth cards, death certificates and Orleans Parish marriage certificates. Residents will continue to have access to certified copies of vital events at the Vital Records Central Office in New Orleans and through the more than 30 Clerks of Court across the state who currently offer this service, as well as through the mail, fax and online. OPH is also piloting a kiosk solution, and is planning to install them at large parish health unit locations throughout the state to provide better access for the public when ordering certified copies of vital event documents. Additionally, LDH is streamlining its regional engineering staff, resulting in the reduction of two positions.

Office of Behavioral Health ($555,893 SGF; $1.6 million total; 300 TO). LDH has outlined a plan to achieve savings in FY 13 while maintaining services through a realignment and redistribution of mental health inpatient bed capacity across the state. Beginning October 1, the Southeast Louisiana State Hospital (SELH) campus in Mandeville will be phasing down operations as patient bed capacity is moved to three locations. Thirty-four intermediate beds and 15 acute beds will move to East Louisiana Mental Health System; 60 intermediate beds will move to Central Louisiana State Hospital (CLSH); and 17 adult acute beds and 50 child/youth beds will be relocated to private hospitals in the New Orleans area.

Office of Aging and Adult Services ($350,000 SGF). LDH will reduce $100,000 in newly added funds from the State Personal Assistance Program, enabling the Department to maintain its current level of services. However, this will prevent LDH from adding approximately 10 additional persons from the waiting list to the program. Further, LDH will delay the phase-in of 350 of the new Community Choice Waiver slots. The remaining 150 new slots will be phased-in once CMS approves a waiver amendment, which is currently being prepared for submission.

Office for Citizens with Developmental Disabilities ($696,719 SGF; 9 TO). LDH will enact means-testing requirements for the Flexible Family Funds program, which provides stipends to families of children with disabilities for expenses related to the child's disability. Families of waiver recipients whose income is more than 650 percent of the federal poverty level will be excluded from the program. OCDD also will eliminate nine positions from their resource centers, primarily in the northern part of the state. The locations for the cuts were selected because most referrals come from Southeast Louisiana and there is no waiting list for services in the northern part of the state.

Medicaid Administration ($1.25 million SGF, $2.5 million total). Medicaid will achieve savings through changes to four existing contracts, none of which will have an impact on recipients. First, LDH will not award a $250,000 contract for a community-based ombudsman for Bayou Health. Rather than executing an additional contract, we will use existing Medicaid staff and contractors to perform the ombudsman function. Second, LDH will eliminate the contract that provided prior-authorization services for the Medicaid dental benefits. The contract is no longer needed as LDH is moving forward with plans to carve dental services into BAYOU HEALTH, where the health plans will become responsible for delivering dental services to Medicaid members in their networks. Third, since the implementation of Bayou Health fully, LDH staff has identified efficiencies in the Maximus contact related to reduced postage needs and administrative costs that will lead to a $1 million savings. Maximus will continue operating the Bayou Health Enrollment Center to provide information to potential enrollees and help enrollees change plans or enroll in a new plan. Last, LDH will reduce administrative fees to Molina by $1,080,000 for processing the monthly payments to Bayou Health Plans.

Medicaid Provider Payments ($190.5 million SGF; $518.4 million total).

LDH anticipates realizing $1.5 million in State General Fund savings to the Medicaid program by implementing a 5 percent SGF reduction in payments through the Greater New Orleans Community Health Connection (GNOCHC), a successful Medicaid pilot program that expands health care coverage to uninsured adults in the New Orleans area, which was created after Hurricane Katrina.

LDH will strengthen its nationally recognized Medicaid eligibility processes to better ensure services are being provided to those who legitimately meet the criteria. Medicaid will begin doing second-level reviews after a person applies for Medicaid prior to making a final decision. (Currently, there is only a first-level review, followed by the decision of whether a person qualifies for Medicaid or not). This addition to the process will increase accuracy of eligibility decisions, change will not impact an eligible individual's ability to qualify for and receive Medicaid.

LDH will use better money management to shift claims payments and generate savings by taking advantage of the higher matching rate in place until Oct. 1.

The optional Take Charge Medicaid waiver program that provides Family Planning services to low-income women between the ages of 19-44 will have its qualifying income limit reduced from 200 percent to 133 percent of the Federal Poverty Level. LDH anticipates this change in income qualifications would affect fewer than 5,000 women, and those women should still be able to receive services for less than $20 through alternate programs.

LDH will reduce Disproportionate Share Hospital (DSH) funding paid to the LSU system by $122 million in FY 2013. Medicaid will continue making DSH payments to LSU hospitals, but will do so at a reduced level. LDH will also reduce the public hospital Medicaid reimbursement rates paid to the hospitals in the LSU Health System by 10 percent. While LDH did not initially reduce public hospital rates in SFY13, most private provider rates were reduced. Even after this reduction, LSU hospital rates are higher than private hospital rates. Together, this represents a 24 percent reduction to LSU Health System's overall SFY13 budget. LDH does not anticipate this reduction of DSH and Medicaid payments to affect Medicaid recipients' access to hospital care.

Effective August 1, 2012, LDH will reduce emergency medical transportation provider rates by 5 percent for SFY 2013. Emergency medical transportation providers offer a valuable service to Medicaid recipients, and staff will continue work with these providers to ensure recipients have continued access to their services.

Effective August 1, 2012, LDH will also enact a 3.7 percent rate reduction in the Medicaid claims paid for inpatient and outpatient services provided by private hospitals. Private hospitals had been excluded from the recently announced 3.7 percent across-the-board Medicaid provider rate reductions for SFY 2013.

LDH will eliminate separate Disproportionate Share Hospital (DSH) funding payments to rural hospitals. Rural Hospitals will continue to receive Medicaid claim payments at 110 percent of cost as required by the Rural Hospital Preservation Act. DSH is the largest discretionary program Medicaid funds in Louisiana. As with the reduction of DSH payments to LSU hospitals, LDH does not anticipate that eliminating DSH payments to rural hospitals will impact Medicaid recipients' access to care.

LDH will reduce the Medicaid reimbursement rate paid to nursing homes by 11 percent in FY13, for a total savings of approximately $23.2 million dollars. Because of backfill statutorily dedicated trust fund monies, access to nursing home care will not be affected by this reduction, and LDH does not anticipate any interruption in services for Medicaid recipients currently in nursing home care.

LDH will realign payments to the two Bayou Health Shared Savings Health Plans by enacting a 10 percent reduction to the per-member per-month care management fee these plans receive to coordinate primary care services for their members. An analysis conducted by LDH's actuary shows that the per-member per-month rates for these can be lowered and still remain within actuarial limits as there are more members enrolled per plan than predicted in the original estimates used to set the initial rates.