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Archive for the ‘Revenue’ Category

Tomorrow (Aug. 15) is the last day for 24 employees of the Office of Group Benefits (OGB) but the bad news doesn’t end there, LouisianaVoice has learned.

Commissioner of Administration Kristy Nichols’ glowing guest column about the condition of OGB in Jeremy Alford’s Louisiana Politics notwithstanding, some 230,000 state employees, retirees and their dependents are in for some serious sticker shock.

http://lapolitics.com/2014/08/nichols-ogb-prepared-for-changing-world-of-health-care/

Even as Nichols babbled on about providing “better service and care to its members” while at the same time employing the by now tired and time-worn Jindal tactic of blaming everyone but Jindal for rising health care costs, the Legislative Fiscal Office was dropping a bombshell in announcing dramatic increases in health care insurance premiums for state employees coupled with benefits that will be undergoing deep cuts.

OGB Report_July 2014 FOR JLCB

Blaming the Affordable Care Act (Obamacare) and an aging population for rising health care costs, Nichols said “financially responsible practices” are necessary to continue providing benefits. She conveniently neglected to mention that it was the Jindal administration’s decision a year ago to lower premiums as a means of lowering the state’s 75 percent match, thereby freeing up money to plug gaping holes in Jindal’s makeshift budget.

That move, of course, help decimate OGB’s reserve fund. What started out as a $540 million surplus a year ago now stands at less than half that.

“At first glance it may seem like having a fund that large is a great thing,” she wrote. “But in reality, keeping hundreds of millions unnecessarily locked up in a reserve fund was not the best use of taxpayer money.

“Considering that the state funds 75 percent of member premiums through taxpayer dollars, letting that large of a balance sit unused meant that those funds weren’t being used for other important projects,” she said.

Nichols, of course, overlooks the fact that successful insurance companies keep health reserve funds in cases of a natural disaster or major epidemic. Companies who only manage to pay claims out of premiums on the other hand, traditionally don’t survive.

Her entire 800-word piece never once mentioned that state employees and retirees would soon be asked to pay significantly higher premiums for equally significantly reduced benefits. Instead, she parsed words, saying, “Plan changes for fiscal year 2015 are estimated to lower expected claims costs by $131.8 million…”

That sounds pretty good until you read the first page of the nine-page report released Monday by Legislative Fiscal Officer John Carpenter and Legislative Fiscal Office Section Director J. Travis McIlwain.

State employee health plan changes, according to the report, include, among other things:

  • An increase in premiums state employees and retirees pay for health coverage;
  • Significantly increase the out-of-pocket maximum for all health plan options;
  • Increasing deductibles for all health plan options;
  • Increasing co-pays 100 percent for those proposed health plans with co-pays;
  • Increasing the out-of-pocket maximum for the prescription drug benefit by $300 from $1,200 to $1,500 per year, a 20 percent increase;
  • Requiring prior authorizations for certain medical procedures;
  • Eliminating the out-of-network benefit for some health plan options;
  • Removing all vision coverage from the health plan options.

The latest premium increase of 6 percent will go into effect on Jan. 1 is on top of a 5 percent increase implemented on July 1 of this year.

Of course, the revamp of OGB premiums and benefits was the result of the infamous Alvarez & Marsal (A&M) study.

The really amazing thing about that is Jindal rushed into the OGB privatization convinced he could do no wrong and that his was the only way and that the state was going to save millions. Yet, when things started going south, he calls in the big A&M guns.

Not only that, he forked over $199,752 to A&M to learn the best way to screw state employees.

Speaking of A&M, the contract with the firm was originally for a little more than $4.2 million but was promptly amended by $794,678, bumping the amount up to a cool $5 million. The problem with that is state law allows only a one-time contract amendment of no more than 10 percent without legislative concurrence. The amendment was for 18.9 percent.

As if that were not egregious enough, the Division of Administration subsequently amended the contract by yet another $2.4 million in May—again without bothering to obtain the legally mandated concurrence from the legislature.

Nothing, it seems, is beneath this administration.

Well, don’t say you weren’t warned. LouisianaVoice said before the OGB privatization ever took place that it would be necessary to raise premiums or lower benefits.

But Jindal, wunderkind that he is, insisted his privatization plan, ripped straight from the pages of the handbook of his only private sector employer, McKinsey & Co., would be more cost efficient than having those lazy state workers process claims and that the state would save money.

And lest you forget, McKinsey advised AT&T in 1980 there was no future in cell phones.

And of course, McKinsey developed the flawless business plan for Enron.

To a degree Jindal is correct; the state will now save money—on the backs of state employees.

State Rep. John Bel Edwards (D-Amite), who is an announced candidate for governor in the 2015 election agrees.

“The OGB fiasco is proof positive that privatization for the sake of privatization is foolish,” he said. “A reserve balance that recently exceeded $500 million is half that now and  bleeding $16M per month due to mismanagement and budget chicanery, and the ultimate price will be paid by state retirees and employees through higher premiums, higher co-pays, higher deductibles, and higher co-insurance in exchange for fewer benefits, more forced generic drugs, and more preclearance of needed treatments and other changes that make crystal clear that the OGB beneficiaries will pay more for less.”

Bingo! And right on cue, Carpenter’s report echoed Edwards:

“The health plan and prescription drug plan policy changes…will shift more of the costs from the state to the OGB plan member,” it said.

That shift will save the state a minimum of $44.7 million for health plan changes and at least $69 million for prescription drug plan changes in fiscal year 2015, the report said.

“Along with premiums, the major costs incurred for medical services by an OGB plan member will be deductibles, co-payments and coinsurance,” it said. “The new health plan offerings will significantly reduce the cost to OGB, while the OGB members pay more for their medical services.”

Of the total OGB population, 75 percent are currently enrolled in the HMO plan which presently has no deductible for the employee but those members will, effective January 1, be subject to both a deductible and coinsurance whereas most are currently subject only to fixed co-pays.

 

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When the Department of Health and Hospitals released its “Public-Private Partnership” financial report on nine state hospitals last month, it was pretty much assumed that the state media would accept the glowing report at face value and trumpet the Jindal administration’s brilliance in the privatization plan.

To no one’s surprise, Jindal cheerleader Scott McKay, curiously writing under the pseudonym “MacAoidh,” which he explained was the Gaelic spelling of his name, jumped out in front of the parade. Close behind were Lauren Guillot of the LSU Reveille and Chris LeBlanc of the Thibodaux Daily Comet.

http://www.lsureveille.com/news/hospital-privatization-cost-million-less-than-budget/article_aba78c98-12c6-11e4-9da3-0017a43b2370.html

http://www.dailycomet.com/article/20140724/ARTICLES/140729784

The latest to chime in is Quin Hillyer, an unsuccessful Alabama-congressional-candidate (he finished fourth in the Republican primary)-turned-columnist for the Baton Rouge Advocate who somehow purports to be an expert on Louisiana politics but who continues to live in Mobile.

The DHH report attempted to show that Jindal’s privatization plan—a plan, by the way, that has yet to be approved by the Center for Medicare and Medicaid Services(CMS)—has cost the state $51.8 million less than expected during the fiscal year ended June 30.

STATE HOSPITAL FINANCIAL REPORT

But those numbers are disingenuous at best.

The first column of the DHH spreadsheet contains the amounts budgeted for each of the nine hospitals for the fiscal year that ended on June 30.

That’s simple enough to comprehend but the second column is the key. That column lists the amounts actually spent as of June 30 while the third column reports the difference between the amounts appropriated and the amounts spent. That’s where DHH came up with the aggregate savings of $51.8 million.

But what the report neglects to say is that the books on those fiscal year 2013-2014 expenditures will not be closed until later this month, so any reported costs (Column 2) will necessarily increase, thereby negatively impacting Column 3. (Column 4 simply gives the appropriations for each hospital for the current (2014-2015) fiscal year.)

By way of explanation, “Public Claims” is the traditional Medicaid payments the state made to the public hospitals. “Public UCC” is the uncompensated care, or DSH payments the state made to the LSU hospitals. “Private Claims” are the Medicaid payments made to the new private hospital partners. These are the same payments as the “Public UCC” payments, only larger and fueled by the lease payments used by the state for match, thereby cutting state funds and giving the illusion of shrinking government.

“Private UPL” stands for “upper payment limit,” which is a supplemental Medicaid payment which the state must match—which is now done from the lease payments that CMS has yet to approve. “Private UCC” is DSH payments the state is also allowed to make to private hospitals.

It is not unusual for individual hospitals to vary from their original budgets because they have the flexibility to move money around, using savings in one area to cover expenditures in others. The bottom line is what is significant.

Even with that Enron-esque method of bookkeeping, several hospitals have already overspent their budgets even before the final numbers are in, the report shows. Those include Earl K. Long Medical Center in Baton Rouge ($12.2 million over budget), Interim LSU Hospital in New Orleans ($5.9 million), University Medical Center in Lafayette ($8.8 million) and W.O. Moss in Lake Charles ($1.2 million).

Others that were close to spending all of their appropriations included Chabert Medical Center in Houma and E.A. Conway in Monroe.

The total appropriations for all nine hospitals for the 2013-2014 fiscal year is $1.111 billion against $1.058 billion spent, a difference of $51.8 million, according to the report which again, does not reflect the final numbers.

The 2014-2015 appropriation for the nine facilities is $1.15 billion which means if nothing changes in expenditures for the current budget (a highly unlikely, almost impossible scenario), the state will still spend $91.5 million more on the hospitals in 2014-2015 than in the previous fiscal year.

And should the final numbers for 2013-2014 show that the hospitals spent the entire $1.111 billion appropriated, the state still will spend $39.7 million more this year than last.

Somehow, that just doesn’t support the $51.8 million “savings.”

Moreover, the report conveniently does not provide us with the means of finance so we have no concept of how much is state funding and how much is federal. No matter; the cold hard facts are that the partnerships between the state and private hospitals were supposed to save money and they clearly have not.

The 2013-2014 fiscal year was a hybrid between the old public model and the new private model in which the private hospitals lease the state hospitals and use those lease payments for matching funds that the state puts up to receive federal dollars to make “private” payments.

It is that arrangement that CMS has yet to approve because they involve largely inflated lease payments. While the arrangement may be counterintuitive, the private hospitals are more than happy to agree to the inflated lease payments because the state plans to use those payments as match and promptly draw down big federal matching dollars to then pay back to the private hospitals—if, that is, CMS approval is forthcoming.

None of this matters to Hillyer and McKay, though. Eager to thumb their noses at the skeptics and while taking a deliberate shot at “liberal” gubernatorial candidate State Rep. John Bel Edwards, Hillyer called the hospital privatization plan “good medicine,” adding that early critics “should be pulling out the salt and pepper” in preparation to “eat their earlier words.”

http://theadvocate.com/news/opinion/9878018-123/quin-hillyer-jindals-privatization-was

But even more egregious on Hillyer’s part, he claims (erroneously, it should be noted) that CMS “has not sent an official ‘disallowance’ notice” on the advance lease payments when in fact those have already been disallowed outright as being illegal. That, says Edwards, will likely result in future clawbacks of $507 million that the state will owe Medicaid.

He also quoted DHH Secretary Kathy Kliebert as saying negotiations with CMS have put the feds “in a position where, fairly shortly, they can approve our State Plan Amendments.”

Perhaps so, but we’ve heard that song and dance before so we’re going to withhold judgment on that optimistic report.

At least McKay (or MacAoidh if you will) had the good sense not to accept the DHH spreadsheet as the final numbers and at acknowledged a “fuller accounting” would be forthcoming. “And we’ll know next year, after the first full year of the implementation of Jindal’s idea to privatize the charity hospitals, exactly how much money is saved,” he added, making an apparent assumption there would be a savings despite the increased budget for the current fiscal year. http://thehayride.com/2014/07/surprise-the-privatized-charity-hospitals-come-in-52-million-under-budget/

But then McKay, as is his wont, became a bit melodramatic by pointing out observers “might be at a loss to summon up memories of dead bodies due to neglect as a result of the privatization. If there are oodles of corpses littering the roadsides outside of hospitals throughout Louisiana for lack of admittance, they’ve gone strangely unreported.”

We honestly don’t know where he came up with that wild scenario that he somehow implies was the claim of privatization opponents. “Nobody suffered from the leases of those hospitals,” he continued. “And the state is going to save a lot of money as a result, while likely delivering better services to the public.”

That, of course, remains to be seen. If he is right, he’s right. But it’s difficult to arrive at that conclusion when you look at the numbers on the DHH spreadsheet.

If, that is, you bothered to study the numbers closely which some obviously did not—just as the administration counted on.

(With appreciation to two regular readers who helped us interpret the numbers and their meaning.)

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By Stephen Winham

I was among a distinct minority of people in state government who thought adding DROP to our state retirement systems was a bad idea for the state from the outset. It clearly provided a good benefit for employees at a time when state salaries were not nearly so generous as today, but I was concerned about the real costs, not just to retirement systems, but to agencies’ active payrolls. I was also concerned about real and perceived inequities resulting from employees making decisions they would later regret. In my opinion, the existence of DROP in state retirement systems has generally failed to benefit the state financially or otherwise – And I find the whole concept of “Back DROP”, the State Police Retirement System option recently publicized in conjunction with the controversy over SB 294 of 2014, ridiculous on its face.

DROP for our state retirement systems seemed to at least have sensible goals when originally implemented and estimating the fiscal impact seemed relatively easy for an actuary. Simply put, an employee, who would otherwise be entitled to retire, continued working and drawing a pay check. The amount that would have been paid the retired employee in monthly retirement checks was frozen at that level and went into a DROP account each month while the employee continued to draw a salary. The employee did not have to make contributions to his/her retirement system while in DROP, so s/he got an immediate increase in net pay and could continue to get raises, though they would not increase the retirement benefit amount. When the employee actually retired s/he could get the balance in the DROP account and begin to receive monthly retirement checks.

DROP was sold as a way to retain experienced employees for a period of time beyond when they might otherwise actually retire by providing them with an additional incentive. It was also supposed to accomplish the almost contradictory goal of encouraging higher paid employees to actually retire at the end of DROP participation. This would reduce the amount of money necessary for salaries overall and/or create additional promotional opportunities and openings for other employees.

So, DROP was viewed by most as a simple, predictable benefit for both the state and its employees. But, guess what?   It has rarely worked that way and the reality of the way it does work begs the following questions:

  • How many people who participate in DROP would have really retired, when eligible, in its absence? Based on experience, the answer is very few. Therefore, the major ostensible advantage of DROP to the state, retention of experienced employees, would not seem to have actually been a state issue.
  • How many state employees with retirement eligibility are indispensable? Again, my answer would be very few. A significant percentage of indispensable employees would indicate gross understaffing, poor management planning, or both.
  • How many people who enter DROP actually retire at the end of DROP participation? My guess, again based on experience, would be significantly fewer than originally projected.

Because employees can come out of DROP and continue to work without skipping a beat, any expected salaries savings can evaporate quickly. In fact, high salaried people not already eligible for the absolute maximum in retirement benefits often continue to work an additional minimum of 3 years so they can start to accrue additional benefits to be paid as supplements to their “frozen” regular retirement checks. So, ultimate liabilities of the retirement systems are harder to project and salaries on the active payroll are often higher than they would have been otherwise.

The new option Colonel Mike Edmonson apparently wanted to take advantage of via SB 294 only exists in the State Police Retirement System and is called “Back DROP”. I had never heard of this before and still find it hard to believe it exists and was actually recommended by an actuary. It does absolutely nothing DROP was intended to do except encourage some people to simply work longer.

If I understand it correctly, under “Back DROP” the employee starts thinking about retiring and how to game the retirement system to his/her best financial advantage. As retirement eligibility approaches, s/he gets the system to run numbers so s/he can make the best choice when s/he actually retires between the following:

1. Pretending s/he entered DROP up to 3 years ago (going back to the future, in other words); or

2. Getting a lifetime benefit based on the highest average salary

Does that sound anything like DROP to you? Me, neither. It sounds like having your cake and eating it, too. Those eligible can’t possibly make the wrong decision – for them – and no pesky actuarial reductions in benefits like the Initial Benefit Option (IBO) that is available to all retirees.

Go to the following link, scroll down to “BACK DROP Plan – Only for Members Eligible for DROP after 10/01/2009” and see how you interpret the option: http://lsprs.org/retirement/options/

Now, think about it. How is it possible to get in the ballpark of figuring out how to adequately fund a benefit that doesn’t actually defer anything and lets those eligible choose the best option for them at the last possible moment?   How must the thousands of people who retired under regular DROP plans in all state retirement systems feel about the ability of anybody else to have this open-ended option?

Our retirement systems have total unfunded accrued liabilities of some $19 Billion. These liabilities did not crop up overnight but must, under existing law, be liquidated by 2029. How can any legislative action that extends state retirement benefits to those not previously eligible for them possibly do anything to help address this problem?

As Everett Dirksen said, “A million here, a million there, pretty soon you’re talking real money.” In Louisiana, we don’t seem to get the simple truth of that, and not just in our retirement policies.

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When Louisiana’s favorite Koch-head Bobby Jindal rejected the Medicaid expansion provided under the Affordable Care Act (ACA), aka Obamacare, he trotted Kathy Kliebert, his third secretary of the Department of Health and Hospitals (DHH) before the legislature to proclaim that the state would have to pay $1.7 billion over a decade for the expansion.

The nonpartisan Legislative Fiscal Officer, however, cut that 10-year estimate by half: $886 million, pointing out that in the first three years, the expansion would actually reduce state spending.

Never mind that his refusal to accept the $16 billion in new Medicaid money would provide health care for nearly a quarter-million Louisiana residents currently without medical coverage.

Never mind that his decision meant that Louisiana residents, like those in the other 20 or so state that rejected the Medicaid expansion, would be paying for its implementation in other states.

Never mind that the $280 million Medicaid expansion would cost the state in 2022 pales in comparison to the $2.2 billion the state is projected to spend on incentive payments to attract private business to the state—some of which would produce no new jobs or at best, low-paying jobs.

Never mind also the $80.6 million Broadband Technology Opportunities Program (BTOP) federal grant to provide high speed broadband internet to rural areas of Louisiana—also rejected by Jindal in lockstep compliance with the wishes of the Koch brothers-run American Legislative Exchange Council (ALEC) agenda.

And never mind the fact that despite Jindal’s disdain for accepting federal funds (remember how he, like Queen Gertrude in Hamlet, protested too much about accepting stimulus funds from the 2009 American Recovery and Reinvestment Act and then helicoptered to all those Protestant churches in North Louisiana to hand out the checks?), Louisiana still ranks as the fourth most dependent on the federal government.

That’s correct; Louisiana is still co-dependent on the federal teat and if Jindal, despite all his anti-government puffery, dared slicing and dicing other federal largesse from an already stressed state budget, he may well have open insurrection on his hands.

Apparently the only area where he can safely reject federal funding to satisfy the far right—especially his benefactors the Koch Brothers, Charles and Bill—is in areas where only the poor and disenfranchised—those unable to fight back—are impacted.

Wall Street Cheat Sheet, an online news service with 11 million monthly readers, notes that despite the ratcheted-up rhetoric between red and blue states, it is the red states (Republican) that are more likely to receive help from the federal government—a fact that helps them keep local tax bills lower and unimaginative politicians like Jindal in power.

In computing its rankings of states’ dependency on federal government, the Cheat Sheet report took three factors into account:

  • Return on taxes paid to the federal government. This statistic reflects how many dollars in federal funding state taxpayers receive for every dollar in federal income taxes paid.
  • Federal funding as a percentage of state revenue. This metric tells what percentage of a state’s annual revenue is provided by the federal government. Without federal dollars, states would have to look elsewhere for revenue, most likely via tax increases, or cut services. The steady influx of federal funds allows executives like Jindal to eschew tax increases while at the same time publicly scorn federal money.
  • Number of federal employees per capita. This illustrates the federal government’s role as a nationwide employer and reveals the percentage of a state’s workforce that owes its livelihood to Washington.

Red states are known for imposing lower taxes than blue states, but it appears they are able to do so because they are more dependent on federal funding, the report says.

The only states more dependent than Louisiana on Washington are (in order) Alabama, New Mexico and Mississippi.

Louisiana’s return on taxpayer investment, for example, if $3.35, meaning the state receives $3.35 for every dollar it sends to Washington. That’s the fourth-highest return in the nation, behind South Carolina ($7.87), North Dakota ($5.31) and Florida ($4.57). That compares to Delaware’s 50 cents return for every dollar paid to Washington and the 56 cents of Illinois and Minnesota.

The 6.76 of its citizens employed by the federal government ranked 14th lowest in the nation.

But that positive was more than offset by the negative metric showing that 44.26 percent of Louisiana’s state budget is funded by federal dollars, second highest only to Mississippi’s 45.84 percent.

That’s correct: the anti-federal government, anti-Washington, more-is-less governor, who preaches the mantra of less government is the best government, serves as chief executive of the state that ranks second in the nation in its voracious appetite for federal dollars.

A quick examination of the bigger line items in the state’s current General Fund and Capital Outlay budgets (which will expire on June 30) is quite revealing—something a little north of $11 billion:

FEDERAL FUNDS

General Appropriations (HB1: FY2013-2014)

Agency:

  • Governor’s office of Coastal Activities: $1,163,604;
  • (DOA) Community Development Block Grant: $1,481,607,780;
  • Coastal Protection & Restoration Authority: $64,470,311;
  • Gov. Off. Homeland Security & Emergency Preparedness ; $1,275,010,482;
  • Department of Military Affairs: $36,558,254;
  • LA. Commission on Law Enforcement and the Administration of Criminal Justice: $21,430,530;
  • Office of Elderly Affairs: $22,318,669;
  • Louisiana War Veterans Home: $6,837,674;
  • State Veterans Cemetery: $769,767;
  • Northeast Louisiana War Veterans Home: $6,632,146;
  • Southwest Louisiana War Veterans Home: $6,725,639;
  • Northwest Louisiana War Veterans Home: $7,015,855;
  • Southeast Louisiana War Veterans Home: $6,301,319;
  • Criminal Law and Medicaid Fraud: $5,989,344;
  • Gaming: $1,375,911;
  • Lt. Governor: $5,509,255;
  • Agriculture & Forestry: $7,716,818, $4,181,260;
  • Office of Business Development (Business Incentives Program): $4,739,367;
  • State Library: $3,099,513;
  • State Parks: $1,371,487;
  • Cultural Development: $2,059,575;
  • DOTD (Aviation): $26,761,411;
  • Pardons & Parole: $1,480,697;
  • Office of State Police: $10,252,081;
  • Office of Motor Vehicles: $1,090,750;
  • Highway Safety Commission; $34,585,088;
  • Office of Juvenile Justice: $891,796;
  • Developmental Disabilities Council: $1,355,052;
  • Medical Vendor Administration (Medicaid/Medicare): $228,242,058;
  • Medical Vendor Administration (Medicare): $4,794,910,040, $185,066,345;
  • Other Medicaid, Medicare funds: $185,066,345;
  • Office of Public Health: $237,866,451;
  • Office of Behavioral Health: $36,185,361;
  • Disaster Crisis Counseling Services: $2,320,529;
  • Office for Citizens with Developmental Disabilities: $6,376,792;
  • Community and Family Services: $598,538,224;
  • Department of Natural Resources: $27,233,004;
  • Office of Conservation: $1,752,796;
  • Office of Coastal Management: $86,206,980;
  • Office of Charitable Gaming: $883,007;
  • DEQ: $4,913,837;
  • Office of Environmental Compliance: $10,094,810;
  • Office of Environmental Services: $4,572,895;
  • Office of Management and Finance: $3,207,858;
  • Department of Wildlife and Fisheries: $2,781,838;
  • Office of Wildlife: $17,526,411;
  • Office of Fisheries: $50,914,428;
  • Office of Workers Compensation Administration: $165,174,992;
  • Board of Regents: $13,363,873;
  • Louisiana Universities Marine Consortium: $4,034,667;
  • Office of Student Financial Assistance: $67,637,166;
  • Louisiana State University Board of Supervisors: $29,713,934;
  • Huey P. Long Hospital: $945,558;
  • Lallie Kemp Regional Medical Center: $4,800,336;
  • W.O. Moss Regional Medical Center: $7,937,503;
  • Washington-St. Tammany Regional Medical Center: $5,481,167;
  • Southern University Board of Supervisors: $3,654,209;
  • Department of Education: $53,743,617, $1,062,669,284, $4,163,877;

Executive Department:

  • Louisiana Youth for Excellence: $877,185;
  • Juvenile Legal Representation: $328,573;
  • Education Programs: $18,972,982;
  • Medical Vendor Administration: $87,191,390;
  • Payments to Private Providers/Services for Medicaid Eligible Children: $844,368,786;
  • DHH: $148,223,040;
  • Office of Children and Family Services: $426,096,064;
  • Louisiana Workforce Commission: $17,465,074;
  • LSU System: $1,572,622;
  • Department of Education: $1,120,576,778;
  • Community Development Block Grant: $1,828,666,994;
  • Coastal Protection and Restoration: $6,400,000;
  • GOHSEP: $1,275,239,610;
  • Education: $19,072,519;
  • Military Affairs: $17,184,491;
  • Commission on Law Enforcement/administration Criminal Justice: $25,083,035;
  • Governor’s Office of Elderly Affairs: $812,222;
  • Title III, V, VII and NSIP: $21,571,923

Capital Outlay (HB2):

  • Department of Military Affairs: $7,389,000;
  • Department of Veterans Affairs: $6,849,462;
  • DOTD: $30,000,000;
  • Wildlife and Fisheries: $1,660,000;
  • St. Helena Court House: $2,680,000;

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As recently as Jan. 16, a headline on NOLA.com proclaimed, “No mid-year budget cuts will be required as Louisiana revenue dips only slightly.”

For the first time in six years, the ensuing story said, “Gov. Bobby Jindal’s administration will not have to make mid-year budget cuts because of less than projected state revenue.”

Fast forward to last Friday, April 4, (late Friday, that is; the tradition of announcing bad news late on Fridays is known in political circles as “taking out the trash,” according to our friend Bob Mann):

Jindal releases a five-page executive order that, says, among other things:

  • Whereas, to ensure that the State of Louisiana will not suffer a budget deficit…prudent money management practices dictate that the best interests of the citizens of the State of Louisiana will be served by implementing an expenditure freeze throughout the executive branch of state government;
  • Now, therefore, I, Bobby Jindal…do hereby order and direct as follows:
  • “All departments, agencies, and/or budget units of the executive branch…shall freeze expenditures as provided in this executive order;
  • “No department, agency, and/or budget unit of the executive branch…shall make any expenditure of funds related to…travel, operating services, supplies, professional services, other charges, interagency transfers, acquisitions and major repairs.”

There followed, as is the case in all such executive orders, a laundry list of exemptions and escape clauses.

But the bottom line nevertheless is tantamount to mid-year budget cuts; the meaning is the same, no matter how the governor tries to spin it.

Oh, there are those who will, of course, argue that a spending freeze is not a budget cut. Those would be the same people (read: Jindal) who said a couple of years back he would veto a 5-cent per pack cigarette tax renewal because he was opposed to new taxes.

Or, taking to its extreme, the administration could trot out Sen. Elbert Guillory (R-D-R-Opelousas—we never know from one day to the next if the announced candidate for lieutenant governor is Republican or Democrat; he’s been both Republican, Democrat and back again) who so eloquently explained the subtle difference between cockfighting and “chicken boxing” during the current legislative session. And yes, he actually did employ that term in defending the activity that is illegal in every single state, including New Mexico, the last to ban cockfighting.

That’s a quick turnaround: less than three months after Commissioner of Administration Kristy Nichols assured us that a projected $35 million budgetary shortfall could be made up with extra revenue expected to be generated by the state’s recent tax amnesty program.

Apparently not.

House Speaker Chuck Kleckley (R-Lake Charles), a member of the state’s Revenue Estimating Conference, blamed Internet shopping for part of the shortfall, saying Louisiana internet shoppers were not submitting sales taxes on their purchases.

Other states—including Arkansas and Alabama who must not have Internet access for their citizens—have experienced increases in sales tax revenues.

All this voodoo economics (to borrow a term from George Bush the First) boils down to one simple yes-or-no question we all should ask of ourselves:

Would we trust this governor or this commissioner of administration to do our taxes?

Here’s the sobering answer to that not-so-rhetorical question: we already are.

Indeed, we have been for the past six years.

 

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It’s small wonder that Gov. Bobby Jindal wanted to get out of town quickly—he departed the state for an extended trip to Asia to recruit business and industry investment in Louisiana—given the flak he is receiving from the legislature and radio talk show hosts over his hiring of a consulting firm at a cost of $4.2 million to somehow magically find $500 million in state government savings. http://theadvocate.com/csp/mediapool/sites/dt.common.streams.StreamServer.cls?STREAMOID=sZuDzNJoJK2fudmeRm9FJpM5tm0Zxrvol3sywaAHBAlauzovnqN0Cbyo1UqyDJ6gE0$uXvBjavsllACLNr6VhLEUIm2tympBeeq1Fwi7sIigrCfKm_F3DhYfWov3omce$8CAqP1xDAFoSAgEcS6kSQ–&CONTENTTYPE=application/pdf&CONTENTDISPOSITION=Alvarez%20Marsal%20Government%20Savings%20Contract.pdfhttp://theadvocate.com/news/8045923-123/vitter-super-pac-raises-15

And that contract doesn’t even take into account Pre-Jindal recommendations by the firm that may ultimately end up costing taxpayers $1.5 billion which, of course, would more than offset any $500 million savings it might conjure up that the Legislative Fiscal Officer, the State Treasurer, the administration, the legislature and the Legislative Auditor have been unable to do, largely because of a time honored political tradition affectionately known as turf protection.

One might even ask, for example, why representatives of the consulting firm, Alvarez & Marsal, who somewhat smugly call themselves “efficiency engineers,” were wasting their time Friday at the gutted Office of Risk Management. Isn’t there already a promise of $20 million in savings on the table as a result of Jindal’s privatization of that agency four years ago? For just that one small agency, that’s 4 percent of the entire $500 million in savings Jindal is seeking through the $4 million contract. (The elusive $500 million savings, for the real political junkies, represents only 2 percent of the state budget.)

The Baton Rouge Advocate also got in on the act on Saturday with Michelle Millhollon’s excellent story that  noted that the actual contract contains no mention of a $500 million savings. http://theadvocate.com/home/8131113-125/vaunted-savings-not-included-in

That revelation which is certain to further antagonize legislators, including Senate President John Alario (R-Westwego) whom Jindal will now probably try to teague for his criticism of the governor’s penchant for secrecy.

Hey guys, your contract is only for four months, so why waste your time in an agency that supposedly is on the cusp of a $20 million savings? That ain’t very efficient, if you ask us.

Legislators immediately voiced their displeasure at the contract. “There’s a lot of people who don’t like it,” said Rep. John Schroder (R-Covington), a one-time staunch Jindal ally.

Rep. Tim Burns (R-Mandeville), chairman of the House Governmental Affairs Committee (if he hasn’t been teagued by now), said when the dust settles any cost cutting will ultimately be the responsibility of state officials. “Even the best PowerPoint presentation isn’t going to cut government,” he said. “The trick is to make the political choices.”

The contract raises immediate questions how Jindal, now entering his seventh year in office, could justify the move in light of his many boasts of efficiencies his administration has supposedly initiated.

Ruth Johnson, who is overseeing the contract for the Division of Administration, defended the deal with the simplistic and less than satisfactory logic that “Sometimes you have to spend money to save money.”

And while Jindal has indicated he wants a final set of recommendations in April, the contract runs through 2016, meaning the final cost could far exceed the $4.2 million Alvarez & Marsal is scheduled to receive for its review.

Jim Engster, host of a talk show on public radio in Baton Rouge, on Friday predicted during an interview with State Treasurer John Kennedy that Alvarez & Marsal’s final report will most likely bear an uncanny resemblance to the 400-plus-page interim report of Dec. 18, 2009, by the infamous Commission on Streamlining Government.

The hearings by that commission, you may remember, gave birth to the term teaguing, a favorite tactic employed by the Jindal administration when a state employee or legislator refuses to toe the line. A state employee named Melody Teague testified before that commission and was summarily fired the following day. Six months later her husband, Tommy Teague, was fired as head of the Office of Group Benefits when he was slow in getting on board the Jindal Privatization Express. Mrs. Teague appealed and was reinstated but her husband took employment elsewhere in a less volatile environment.

The Alvarez & and Marsal representatives have pleaded ignorant to questions of whether their report will draw heavily from the four-year-old commission report and even professed to not know of its existence.

A curious denial indeed, given that Johnson was also the ramrod over the streamlining commission during Jindal’s second year in office. Does she not share this information with the firm or was all that commission work for naught? Or part of Jindal’s infamous deliberative process? Curious also in that Alvarez & Marsal is specifically cited—by name—no fewer than six times in the report’s first 51 pages, each of which is in the context of privatizing the state’s charity hospital system. The report quoted the firm as recommending that:

  • “The governor and the legislature authorize and direct the LSU Health System to adopt the recommendations of Alvarez and Marsal for the operation of the interim Charity Hospital in New Orleans. The governor and legislature direct every other charity hospital in Louisiana to contract for a similar financial and operational assessment with a third party private sector consulting firm, such as but not necessarily Alvarez and Marsal, that specializes and has a proven track record in turnaround management, corporate restructuring and performance improvement for institutions and their stakeholders.”

That’s right. That is where the seed was apparently first planted for the planned privatization of the LSU Hospital system, even to the point of directing the LSU Board of Stuporvisors to vote to allow a Shreveport foundation run by one of the LSU stuporvisors to take over the LSU Medical Center in Shreveport and E.A. Conway Medical Center in Monroe. Alvarez & Kelly performed that bit of work under a $1.7 million contract that ran for nine months in 2009, from Jan. 5 to Sept. 30 (almost $200,000 per month).

Alvarez & Marsal also received a $250,000, contract of a much shorter duration (10 days) from Jindal on April 9, 2013, to develop Jindal’s proposal to eliminate the state income taxes in favor of other tax increases. That quickie, ill-conceived plan was dead on arrival during the legislative session and Jindal quickly punted before a single legislative vote could be taken

But Alvarez & Marsal’s cozy if disastrous relationship with state government goes back further than Jindal, even. http://www.alvarezandmarsal.com/case-study-new-orleans-public-schools It’s a relationship that could become one of the most costly in state history—unless of course, the state chooses to ignore a court judgment in the same manner as it has ignored a $100 million-plus award (now in the neighborhood of a quarter-billion dollars—with judicial interest) stemming from a 1983 class-action flood case in Tangipahoa Parish.

In fact, the state probably has no choice but to ignore the judgment as an alternative to bankrupting the state but that does little to remove the stigma attached to a horrendous decision to accept the recommendation of Alvarez and Marsal which subsequently was rewarded with a $29.1 million three-year state contract from April 4, 2006 to April 3, 2009 to “develop and implement a comprehensive and coordinated disaster recovery plan in the wake of Hurricane Katrina.”

In December of 2005, the Orleans Parish School Board adopted Resolution 59-05 on the advice of the crack consulting firm that Jindal somehow thinks is going to be the state’s financial salvation.

That resolution, passed in the aftermath of disastrous Hurricane Katrina was specifically cited in the ruling earlier this week by the 4th Circuit Court of Appeal that upheld a lower court decision the school board was wrong to fire 7,500 teachers, effective Jan. 31, 2006. The wording contained in the ruling said:

  • “In December 2005, the OPSB passed Resolution No. 59-05 upon the advice and recommendation of its state-selected and controlled financial consultants, the New York-based firm of Alvarez & Marsal. The Resolution called for the termination of all New Orleans Public School employees placed on unpaid “Disaster Leave” after Hurricane Katrina, to take effect on January 31, 2006.1 On the day that the mass terminations were scheduled to take place, Plaintiffs amended their petition to seek a temporary restraining order preventing the OPSB from terminating all of its estimated 7,500 current employees at the close of business on that day. The trial court granted the TRO and this Court and the Louisiana Supreme Court denied writs on the issue. The TRO was later converted into a preliminary injunction that restrained, enjoined and prohibited the OPSB, et al, from “terminating the employment of Plaintiffs and other New Orleans Public School employees until they are afforded the due process safeguards provided in the Orleans Parish School Board’s Reduction in Force Policy 4118.4.” Nevertheless, Plaintiffs and thousands of other employees were terminated on March 24, 2006, after form letters were mailed to the last known address of all employees of record as of August 29, 2005.”

The appellate court upheld the award of more than $1 million to seven lead plaintiffs in the case of Oliver v. Orleans Parish School Board but adjusted the lower court’s damage award, ordering the school board and the Louisiana Department of Education to pay two years of back pay and benefits and an additional year of back pay and benefits to teachers who meet certain unspecified requirements.

Immediately following Katrina, state-appointed Alvarez and Marsal set up a call center to collect post-Katrina addresses for a majority of staff members in time for the anticipated layoffs. But when the state began the hiring process for schools that had been taken over, the terminated employees were never called, prompting plaintiff attorneys to charge that the entire procedure was intentional and part of the state’s plan to take over the Orleans Parish school system.

Plaintiffs said that then-State Superintendent of Education Cecil Picard chose Alvarez & Marsal to prevail upon the school board to replace acting parish Superintendent Ora Watson with an Alvarez & Marsal consultant.

So, Watson was replaced, 7,500 teachers were fired, and the teachers sued and won, leaving the Orleans School Board and the state liable for a billion-five and the firm that started it all is hired by Jindal to find savings of an unspecified amount. What could possibly go wrong?

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“A lot of people know they owe money. This gives an opportunity for them to save some money and get the debt cleared.”

—Senate President John Alario (R-Westwego), on the two-month tax amnesty program that goes into effect on Sept. 23 and which will allow delinquent taxpayers to save 100 percent on penalties and half of the interest on their late taxes.

“By creating the Office of Debt Recovery and better collecting funds owed to the state, we can use taxpayer dollars more responsibly and ensure that we continue funding critical services like education and health care.”

—Gov. Bobby Jindal, on signing HB 629 (Act 399) into law, creating the Office of Debt Recovery within the Department of Revenue.

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Some things are just downright difficult to understand;

  • Item: On June 20, Gov. Bobby Jindal signed HB 629 (Act 399) into law. The bill, passed during the 2013 legislative session, created the Office of Debt Recovery within the Louisiana Department of Revenue for the collection of delinquent debts owed to certain government entities—taxes that one source said far exceed the official estimates.
  • Item: A month later, on July 21, Jindal signed HB 456 (Act 421) into law that created a tax amnesty program whereby those owing taxes to the state may have 100 percent of their penalties and half the interest waived. The letters being sent out this week to delinquent taxpayers, however, could provide them with an argument on a legal technicality that also won’t have to pay the tax principal amounts.

As we said, some things just don’t make sense.

On the one hand, the legislature passes and Jindal signs into law a bill creating an agency whose specific purpose is to collect debt—lots of debts—owed to the state.

The new agency, according to the Legislative Fiscal Office will create 23 new state positions (the antithesis of the Jindal philosophy of government) at a cost of $1.7 million per year in salaries and benefits and another $4.4 million in administrative costs.

But with nearly $1.4 billion in payments owed to state government that are at least six months overdue, that would seem to be a good investment in that one estimate says that if the state increases debt collection efforts on such outstanding debts as delinquent college tuition installments and unpaid environmental monitoring fees by as little as 10 percent, it could generate an additional $100 million per year for the state.

On the other hand, Jindal’s new $250,000-a-year Secretary of Revenue and the Louisiana Legislature, by virtue of Act 421, will let delinquent taxpayers off the hook for all penalties and half the interest owed on those back taxes.

The Legislative Fiscal Office estimates about 300,000 persons and businesses who owe some $700 million in delinquent taxes will be eligible for the amnesty program, though only about 30,000 are expected to take advantage of the amnesty date, which will begin on Sept. 23 and end on Nov. 22.

The state anticipates receiving $200 million from the program for the current fiscal year with the revenues earmarked for health care bills. Any shortfall will result in even more health care cuts.

LouisianaVoice, however, has received information that indicates the amount of delinquent taxes, interest and penalties may be far larger than the $700 million estimate—almost three times that much, in fact.

Figures provided us shows that the total owed exceeds $2 billion. That includes taxes of $1.03 billion, interest of $687,000 and penalties of $301 million.

“It is amazing how many taxes are not paid,” said our source. “Amnesty will give us another few years in ‘garage sale’ money and then when it runs out, say four years from now in the middle of the next administration (the) Jindalites can cry foul and push for more of the same type programs.”

The amnesty letters are being printed this weekend and will be mailed out within the next few days. “The letter tells taxpayers what they owe and explains that they owe half the interest and no penalty,” the LDR employee said. “But it doesn’t mention anything about paying the tax. A good lawyer could mount a good argument on this.

“The word is that the error was discovered this week and the change would have been minimal (by) adding the words ‘tax and’ before the interest comment,” the employee said. “The really interesting thing is this form letter was put together some time ago and at the last minute someone decided to proofread it. Still, it seems as though someone, maybe in the legal department, would have been given this to read.”

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Deadline Set for Turnover to Office of Debt Recovery

of more than $4 million Owed to Taxpayers

State Treasurer John Kennedy announced Monday that 36 Non-Governmental Organizations (NGOs) have until August 31, 2013 to fulfill their obligations under the law or be turned over to the Office of Debt Recovery for the collection of approximately $4.452 million owed to taxpayers.

“The Legislature and the Governor made it very clear with the passage of House Bill 629 and the establishment of the Office of Debt Recovery that the days of owing the state money and hiding are over,” Kennedy said. “We now have an agency in state government with teeth whose sole mission is to ensure every penny owed to the taxpayers is recovered.”

Treasurer Kennedy announced that the Department of the Treasury will issue final demand letters this week to 36 entities that have failed to comply with the provisions of Executive Order BJ 2008-30, established by Governor Kathleen Blanco and continued by Governor Bobby Jindal, which requires transparency and accountability from NGOs that have received direct taxpayer support in past appropriation bills.

“Over the last several years, our Audit & Compliance Division has repeatedly sent certified letters, sent e-mails and even made personal call attempts to these particular entities demanding the required ‘progress reports’ and the supporting documentation required under the law with little or no response,” Kennedy said.  “While most NGOs have worked in good faith with our office and have been in compliance, these 36 organizations have become the most flagrant violators of these important requirements.”

Under the regulations, NGOs receiving taxpayer money directly via HB 1 must provide progress reports and corresponding documentation to the Treasury in order to maintain their appropriations. Examples of the required paperwork include a comprehensive budget, detailed description of the public purpose, and detailed cost information outlining the use of the appropriated funds.  Entities failing to comply with the provisions are required to return the full appropriation to the State Treasury.

Should these 36 entities ultimately decide to continue their non-compliance, they will be among the first items on the agenda for the new Office of Debt Recovery.  Treasurer Kennedy has long advocated the establishment of such an office and made it a top priority during Governor Jindal’s Streamlining Commission in 2009.  Now that HB 629 has made that a reality, state agencies will be required to refer unpaid receivables to a centralized unit for collection.

“I’m hoping all agencies across state government will aggressively utilize this new mechanism to maximize revenues,” Kennedy said. “Every dollar that is brought in by this new process is one less dollar we have to raise in taxes or cut in important priorities, such as funding education or aiding the disabled.”

List of 36 Non-Governmental Organizations (NGOs)

Out of Compliance with Executive Order BJ 2008-30

12th   Ward Save Our Community Organization, Inc. $520,000
Algiers   Enterprise Community Council, Inc. $25,000
BASIC   of Louisiana $85,000
Booker   T. Community Outreach Program $25,000
Boys   & Girls Club of Natchitoches $75,000
Children   of the Village Foundation, Inc. $10,000
Community   Awareness Revitalization & Enhancement Corp. $130,000
Community   Services of Richland, Inc. $30,000
Daughters   of Promise $25,000
Desire   Community Housing Corp. $100,000
Emmit   Spurlock Memorial Foundation $10,000
Fourth   District Missionary Baptist Association of Louisiana, Inc. $75,000
Gordon   Plaza Elderly & Handicapped Apartments, Inc. $30,000
Just   Willing Foundation $75,000
Kids   Coupes, Inc. $140,000
Lady   Flame, Inc. $2,000
Life   Economic Development Corporation $100,000
Lower   Ninth Ward Neighborhood Council, Inc. $15,000
Martin   L. King Jr. Neighborhood Association in Shreveport $100,000
McKinley   High School Alumni Association $125,000
Muttshack   Animal Rescue Foundation, Inc. $15,000
National   Empowerment Coalition, Inc. $150,000
Neighbors   for a Better Baker $10,000
Novice   House, Inc. $50,000
Purple   Circle Social Club $50,000
Rapides   Primary Health Care Center, Inc. $550,000
Serenity   67 $150,000
Southside   Economic Development District, Inc. $50,000
Succor,   Inc. $550,000
Tab-N-Action   (Boy Scouts of Ouachita Parish) $30,000
The   Colomb Foundation, Inc. $300,000
The   Olive Branch Ministries $20,000
Treme   Community Education Program, Inc. $325,000
Twelfth   Ward Save Our Community $100,000
Wilbert   Tross, Sr. Community Development & Counseling Center $350,000
Young   Emerging Leaders of LA $55,000

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A week after the Dallas office of the Center for Medicare and Medicaid Services (CMS) confirmed to LouisianaVoice that the state still had not answered questions about the proposed privatization of state hospitals, the Washington, D.C. office has weighed in with similar concerns in a letter to two state senators.

On Monday it was announced that Health facilities in Houma, Lafayette, Lake Charles and New Orleans had been turned over to private operators as part of Gov. Bobby Jindal’s drive to privatize the university-run hospitals and clinics.

A three-page letter from Cindy Mann, Director of the Center for Medicaid and CHIP Services (CMCS), to State Sen. Ben Nevers (D-Bogalusa) addressed seven questions posed by Nevers and State Sen. Karen Carter Peterson (D-New Orleans) and the answers were no more encouraging to the Jindal administration than those of the Dallas office on June 12.

“In your letter, you raise questions concerning plans by the state to enter into public-private partnerships with Louisiana State University (LSU) and University Medical Center in Lafayette and LSU and Louisiana Children’s Medical Center, and questions related to the Affordable Care Act,” Mann wrote in her June 19 letter to Nevers.

The entire privatization deal would appear to revolve around the first question posed by Nevers: “Will CMS approve the large up-front lease payment arrangements as proposed in the attached public-private partnership lease agreements in Louisiana?”

“The Centers for (CMS) has concerns over the large up-front lease payments described in the Louisiana public-private partnership agreements,” Mann wrote.

A spokesperson for Mann’s office said nothing had changed since the June 19 letter.

“However, at this time, the state has not submitted state plan amendments (SPA) proposing to fund Medicaid payments through the agreements and CMS cannot offer formal determination as to whether the arrangements would conflict with the requirements described in (the Social Security Act,” Mann said. “Once the state submits the SPAs, CMS will request necessary supporting documentation and explanations from the state to demonstrate compliance with these provisions of the statute and regulations.”

Nearly 4,000 state employees were laid off because of the privatization of the facilities that care for the uninsured and which provide training for the state’s medical students.

Nevers, contacted in California where he was attending a conference, said he had never seen a situation where policies needing federal approval were undertaken and finalized before that approval was forthcoming. “It’s premature, to say the least, to do this without written approval in hand,” he said. “The private partners won’t stay in this deal if there are no payments and if CMS doesn’t approve the state’s plan, the whole thing falls apart.”

Nevers said his primary concern was continued health care delivery for the state’s poor. “In any business venture, you would not jeopardize services based on ‘maybes.’”

He said Jindal may well have more information than he has, “but the people who make the decisions do not have the information. Moving forward is something we should not be doing at this time.

“Neither should the LSU Board of Supervisors have agreed to a major contract for the transfer of the hospitals that contained 50 blank pages,” he said.

Mann, in her letter said that while the lease agreements themselves would not be subject to CMS approval, “to the extent that the lease agreements contain financing arrangements that are involved in the state’s funding of its Medicaid program, CMS will review the lease arrangements to insure compliance with federal Medicaid laws and regulations.”

She said any SPA request by the state to modify its Medicaid service payments will be reviewed by CMS to insure compliance with federal Medicaid laws and regulations. “This includes the source of non-federal funds used to fund the service payments,” she said.

Nevers, in his letter to Mann, asked if Louisiana were to expand its Medicaid program under the Affordable Care Act (Obamacare) “are there any federal provisions that would prohibit Louisiana from withdrawing from such an expanded Medicaid program at any time, including after participating in the 100 percent federal funding available in 2014, 2015 and 2016?”

Mann responded in the affirmative: “A state may choose whether and when to expand, and if a state covers the expansion group, it may later decide to drop the coverage, without any federal penalty.”

The Louisiana Civil Service Commission approved the contracts for the takeover of four hospitals in Houma, Lafayette, New Orleans and Lake Charles on June 10 despite the lack of CMS approval of the state’s privatization plan.

Commission member Scott Hughes of Shreveport said the approval was based on the state budget approved by the legislature which he said assumed the privatization of the hospital. That action, he said, would leave no money available to operate the hospitals through LSU if the deals had been rejected.

While that is not among the criteria that the Civil Service Commission is supposed to consider when layoff plans are submitted by state agencies, it left unanswered the question of what will happen if CMS does not ultimately approve the state’s plan.

A CMS spokesperson in Dallas said on June 12 that CMS does not play any role in the actual privatization of the hospitals. “However, as part of the privatization, the State of Louisiana is modifying the Medicaid reimbursement to those hospitals. The change in reimbursement requires the submission of State Plan Amendments (SPA). CMS currently has received some of the necessary SPA and they are under review.”

Last Jan. 30, Bill Brooks, associate regional administrator for the CMS Division of Medicaid and Children’s Health Operations in Dallas, sent a six-page letter to Ruth Kennedy, director of the Bureau of Health Services Financing for the Department of Health and Hospitals (DHH) in which he requested additional clarifying information which he cautioned had the effect of “stopping the 90-day clock” for CMS to take action on the proposed SPA which “proposed to revise the reimbursement methodology for inpatient hospital services to establish supplemental Medicaid payments to non-state-owned hospitals in order to encourage them to take over the operation and management of state-owned and operated hospitals that have terminated or reduced services.”

He said a new 90-day clock would not begin until his office had received satisfactory responses to his requests.

One of the requirements that Brooks cited was one which said CMS “must have copies of all signed standard Cooperative Endeavor Agreements.” He also asked the state to provide all Intergovernmental Transfer (IGT) management agreements and “any other agreements that would present the possibility of a transfer of value between the two entities.”

He said, “CMS has concerns that such financial arrangements meet the definition of non-bona fide provider donations as described in federal statute and regulations.

“Detailed information needs to be provided to determine whether the dollar value of the contracts between private and public entities had any fair market valuation. There can be no transfer of value or a return or reduction of payments reflected in these agreements,” he said.

“Additionally, whether the State is a party to the financial arrangement or not, the State is ultimately responsible to ensure that the funding is appropriate.”

Brooks asked, “How many entities does the State anticipate will participate in this arrangement? Please submit a list of all participating hospitals, all transferring entities doing the IGT, and the dollar amount that the transferring entities will IGT. Please describe how the hospitals are related/affiliated to the transferring entity and provide the names of all owners of the participating hospitals.”

In the case of the Leonard Chabert Medical Center in Houma, the lessee is listed as Terrebonne Medical Center of Houma but in reality, Ochsner Medical Center of New Orleans will be taking over operations of Leonard Chabert.

“What is the source of all funds that will be transferred?” Brooks asked. “Are they from tax assessments, special appropriations from the State to the county (parish)/city or some other source?

“The State plan methodology must be comprehensive enough to determine the required level of payment and the Federal Financial Participation (FFP) to allow interested parties to understand the rate setting process and the items and services that are paid through these rates,” Brooks said. “Claims for federal matching funds cannot be based upon estimates or projections. Please add language that describes the actual historical utilization and trend factors utilized in the calculation,” he said.

Brooks also asked if the private hospitals destined to take over operations of the state facilities are required to provide a specific amount of health care service to low income and needy patients. “Is this health care limited to hospital only or will health care be provided to the general public? What type of health care covered services will be provided?” he asked.

The CMS spokesperson on Wednesday said if CMS disapproved an amendment, “there would be no federal dollars provided for the changes proposed in the State Plan Amendment.”

“No federal dollars” could translate to hundreds of millions of dollars for a state already wrestling with suffocating budgetary constraints.

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