Not that we told you so, but…..we told you so. Several times.
LouisianaVoice has questioned the wisdom—and legality—of the shaky LSU hospital privatization deals since day one and on Friday, the U.S. Centers for Medicare and Medicaid Services (CMS) notified the state that it had refused to sign off on the administration’s plans to privatize LSU hospitals in New Orleans, Shreveport, Monroe, Houma, Lake Charles and Lafayette.
The decision deals a devastating blow to the administration and the state budget for next fiscal year which begins on July 1.
Even more important, the decision throws into serious doubt the operating budget for higher education for the remaining two months of the current fiscal year.
Only last week, Jindal asked State Treasurer John Kennedy to transfer $40 million from other areas to continue funding higher education because an anticipated $70 million in hospital lease payments had not been made.
Kennedy said Friday he was assured that the money would be repaid as soon as the lease payments were received. “Now, I just don’t know,” Kennedy said. “If that $70 million isn’t forthcoming, we have a problem right now, not next year. I don’t believe the legislators realize this yet. I don’t think they realize they will have to cut another $70 million from somewhere to keep higher education afloat. We have to support higher ed.
“Wow. This catches me flat-footed,” he said. “I didn’t expect a decision this soon.”
Commissioner of Administration Kristy Nichols said last week that she was confident that the lease payments would be made but the CMA decision casts a huge shadow over those prospects.
Kennedy added that he believes the legislature will now have to consider his proposal calling for an across the board 10 percent cut in consulting contracts. “That would generate $500 million,” he said.
State Rep. Rogers Pope (R-Denham Springs) said the decision raises the question of “where the state will make up $300 million-plus. You have to wonder how many cans we can keep kicking down the road.
“This is a discouraging development. The budget is scheduled to come to the House floor next Thursday, so there’s no time to find additional money. I just don’t know how to react or how many services we can cut.
“Just last week (Department of Health and Hospitals Secretary Kathy) Kliebert assured the Senate there was nothing to worry about and now this…”
Another legislator was even more outspoken in his criticism of the governor.
“Governor Bobby Jindal’s reckless pursuit of using federal Medicaid funds in an ill-conceived scheme to privatize state-run hospitals has backfired and now the people of Louisiana will pay a dear price,” said State Rep. Robert Johnson (D-Marksville) in a prepared statement. “Governor Jindal has written a blank check to sell our charity hospital system, which is ultimately used by Louisiana’s working poor, and today it has bounced.
“People could die. The sick will get sicker. Our precious hospitals are in turmoil. The state budget is in tatters. Governor Bobby Jindal sits in the midst of this fiscal and healthcare debacle clutching his dreams of the presidency at the taxpayers’ expense.
“I, along with many others, predicted this outcome and now the people of Louisiana have been left with the tab.
“The Jindal administration’s announcement of an appeal is a typical, timid, tepid response that will bear no more fruit than the barren tree Jindal planted last year.
“It will take all of us. Now is not the time to fall back on partisan bickering or to cling to ideology in the face of a fiscal and healthcare disaster,” he said.
Part of the problem was most likely the manner in which the administration was attempting to use federal dollars to attract more federal matching dollars to finance Jindal’s privatization plan; the feds just weren’t buying it.
Here is the scheme: The private hospital pays LSU money to lease the LSU hospital. That money does not stay with LSU; it ends up (directly or indirectly) being used as match in the Medicaid program. After matching those lease payments with federal funds, the total, larger amount is paid back to the private partner in the form of a Medicaid payment. The lease payments supplant the state funds. However, the legislative fiscal office has already raised concerns about the leases being $39 million short which is why the Division of Administration has already begun planning on “double” lease payments this year.
For years states have devised schemes to receive additional federal funds while reducing the state contribution for Medicaid. There is a problem with these schemes, however. Consider this from a 2009 report by the Congressional Research Office:
“In 1991, Congress passed the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments (P.L. 102-234). This bill grappled with several Medicaid funding mechanisms that were sometimes used to circumvent the state/federal shared responsibility for funding the cost of the Medicaid program. Under these funding methods, states collect funds (through taxes or other means) from providers and pay the money back to those providers as Medicaid payments, while claiming the federal matching share of those payments. States were essentially “borrowing” their required state matching amounts from the providers. Once the state share was netted out, the federal matching funds claimed could be used to raise provider payment rates, to fund other portions of the Medicaid program, or for other non-Medicaid purposes.”
DHH’s scheme included a “borrowing” component that looked similar to the practices this legislation was aimed at preventing. Medicaid rules do not allow a Medicaid provider (read “hospital” here) to voluntarily donate money to the state when they know they will get this money back plus more (the federal share) as part of an increase in their Medicaid payments. The federal oversight agency, CMS, had previously expressed concerns to state officials that these lease payments could qualify as non bona fide provider donations.
If CMS determined these are conventional fair market value leases, they would have allowed the payments. Beyond the basic annual lease payments, the deals included “double lease payments” and other large up front lease payments designed to fix the state’s budget problem raising the specter of non bona fide provider donations. If these payments were deemed to be non-allowable, the federal government will recoup any federal funds that were paid as match for these state funds.
The privatization deals were done at a cost of $1.1 billion to the state this budget year, much of that ($882 million) expected to come from federal funds under the scenario alluded to above.
But a terse message from CMS brought all those plans crashing down: “To maintain the fiscal integrity of the Medicaid program, CMS is unable to approve the state plan amendment request made by Louisiana.”
Predictably, Jindal, who refused to wait for federal approval before plunging ahead full bore with his sweeping privatization of the LSU hospital system, said, “CMS has no legal basis for this decision.” (At least he didn’t call the decision “wrong-headed,” as he did in 2012 when a state district court ruled his school voucher program unconstitutional.)
Jindal said he will appeal the decision but for the time being, the six hospitals will be operating under financing plans that have been shot down, which should come as no surprise to observers of this administration. Friday’s decision prompted one of the governor’s critics to comment, “Jindal deserves every misfortune that this may bring him. The people of this state, however, don’t deserve this. He used them for his selfish political purposes.” Another said, “It would be karma if this fiasco totally destroyed Jindal’s national dreams.”
The one question still left unanswered is whether attorney Jimmy Faircloth will once again be called on to defend yet another dog of a legal case on behalf of this blundering administration, thus adding to his legal fees which already exceed $1 million.