The Public Policy

Jindal Care

How reforming Medicaid in Louisiana could prevent single payer across America.

By 12.17.08

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"I say this with good conscience: every year we don't do anything about the uninsured, we end up, by default, moving closer to a single-payer system," Louisiana Secretary of Health and Hospitals Alan Levine warned TAS in an interview. "Because every year, more people get enrolled in Medicare, more people get enrolled in Medicaid, and more people get enrolled in SCHIP... that by itself is having a death spiral effect on private insurance." And a single-payer system, he added, "would be a disaster."

Levine is the man Governor Bobby Jindal has entrusted with the Louisiana Health First Iniative, an overhaul of Louisiana's woefully underperforming Medicaid system. The plan, which has met with approval from free-market health care experts, is scheduled to reach the Louisiana legislature around the same time as a national health care overhaul advocated by President-elect Barack Obama would reach Congress.

While Jindal and Levine believe they can expand insurance coverage by fixing Medicaid, Obama advocates a comprehensive reform at the national level that would mandate universal coverage under a massively federalized system. In the past, Obama has even stated that he favors a single-payer -- meaning socialized -- system.

To forestall this process, Levine and Jindal want to move to a more market-based system. The current Medicaid model in Louisiana is fee-for-service: doctors perform procedures and then send the bill along to the state. Their incentives are terribly misaligned, rewarding the quantity of procedures performed instead of improved patient health outcomes.

As a result, Louisiana ranks last or near last in a number of different health metrics, while being 20th in Medicaid spending. Levine shared a few anecdotes illustrating the failures of fee-for-service, including a visit to a boy who was in a mental hospital because various doctors paid by Medicaid had prescribed him 13 different anti-psychotics, many of which were contraindicated, meaning they were harmful together. The doctor at the mental hospital told him that such cases are common.

IN THE LOUISIANA Health First plan, every Medicaid recipient would have a choice of at least two coordinated care networks (CCN), which would be obligated to accept any Medicaid recipient who applied. The state would then pay the CCN a flat fee per customer, issuing risk-adjusted premiums to subsidize people with poor health or pre-existing conditions. The CCN would then obtain medical services for its subscribers, bargaining with hospitals and clinics and monitoring customers' progress.

Greg Scandlen, president of Consumers for Health Care Choices, told TAS that "this defined contribution system has been extremely successful everywhere it's been tried."

With the CCNs caring for the patients and maintaining modernized records in one central location -- the "medical home" -- the state would be able to reward CCNs that improved health outcomes. Kevin Kane, the president of the Pelican Institute for Policy, told the Spectator that they believe that these managed care plans "will ultimately cost less and provide better outcomes than the traditional fee for service model."

"We bring transparency to the system because we will publish the outcomes for each of these CCNs that we've proposed," Levine explained. The public will know and be able to choose the CCNs with the best care. Since costs will be capped by the state, the CCNs will be forced to compete for Medicaid funds, boosting efficiency.

Scandlen commented, "That's extremely attractive....It will allow Medicaid recipients to vote with their feet when they don't like what they're getting."

Jindal and Levine's plan includes other market-based reforms. They plan to change a public New Orleans hospital into a private nonprofit, and to shut down a public hospital in Southwest Louisiana for inpatient services altogether.

"Those two changes alone are pretty transformational for a state that has had a public hospital system for 70 years," Levine noted. "We're trying to go community by community and transform the delivery system so that it makes sense for that community."

Levine hopes to extend insurance to 106,000 Louisianans through Medicaid, using the savings from efficiencies in the new system. Among many other sources of waste, Levine's actuaries identified $60-80 million per year currently spent to hospitalize patients who do not meet the medical criteria for hospitalization. The problem is that Medicaid rewards for expensive procedures, and not for simple and cheap solutions.

State Rep. Herbert Dixon objected to the reform in the New Orleans Times-Picayune when the plan was announced. "Why do we need to act now when a comprehensive federal plan is forthcoming?" Dixon asked, referring to Obama's support for a health care overhaul next year.

"If our strategy is to wait for Washington to solve our problems, I'd agree with [Dixon]," Levine replied. "Any elected representative who wants to wait around for D.C. to solve his problems needs to explain that to his constituents."

Kane agreed. "Voters did not elect Bobby Jindal so he could sit on his hands and wait for action from Washington...Further, his expertise in health care makes him an ideal candidate to propose market-oriented reforms."

INDEED, IF JINDAL were to wait around for Washington, the solution would probably look like the plan proposed by Montana Senator Max Baucus, which would greatly increase the role of the government with a system of individual and company mandates, and sharply reduce the role of the consumer. Or, as Levine suggested, if enough time passes, it could resemble the single payer system Obama has discussed in the past. Such a socialized system would be disastrous for health care in America -- "There is no way to get around the fact that universal healthcare will either cost too much or deliver a lower quality product," Kane argued.

Jindal and Levine's plan, then, is a model for other states. A successful reform of Medicaid now -- Medicaid recipients represent a large part of the population in most states, 25 percent in Lousiana -- could forestall universal health care and a massive federal intervention into the health care market in the future.

"The good thing is that we're not talking about a single-payer plan," Levine told TAS. We're not now, but if others don't pay attention to Jindal and Levine's example, perhaps we will be.

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About the Author

Joseph Lawler, former managing editor of The American Spectator, is editor of Real Clear Policy. Follow him on twitter: @josephlawler.