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Gather ’round as the Amazing Jindini attempts yet another harrowing political-death-defying escape from fiscal reality

Posted in Auditor, Budget, Finances, Governor's Office, House, Senate, Legislature, Legislators, Office of Group Benefits, Revenue, Transparency on October 16, 2014| 10 Comments »

            The scene is a cheesy carnival with a sleazy barker trying to coax indifferent passersby into a tent sideshow that is certain to be equal parts hype and fraudulence. You can almost hear his voice as he drones:

            “Step right up folks and see the Amazing Jindini perform his astounding, incredible, UNBELIEVABLE escapes from the perils of political reality! You won’t believe your eyes!

            “Watch and don’t dare blink as his lovely assistant, Kristy, the glib but treacherous attack lady, maneuvers Jindini into inescapable positions right here in Louisiana only to see him emerge, smiling and unruffled, somewhere in Iowa. Or will it be New Hampshire, or maybe on Fox News or even in a Washington Post op-ed?

            “And if this political life-threatening feat should somehow go wrong, if the magically transcendent budgetary numbers don’t add up, hold your breath because Kristy will find a way to blame the whole thing on Jindini’s evil nemesis John Kennedy.

            “It’s implausible, it’s dumbfounding, it’s far-fetched, but ladies and gentlemen, it’s everything you could ever imagine—and then some—in the fantasy world of the Great Jindini: deception, misdirection, transference of responsibility, denial, obfuscation. Political contributions become political favors right before your very eyes. Step right up, folks! You don’t want to miss the Amazing Jindini.”

Such is the descent into the cheap theatrics of political rhetoric and finger-pointing from the Jindal administration these days as Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana), through Commissioner of Administration Kristy Nichols, attempts to deflect the blame for fiscal recklessness onto State Treasurer John Kennedy—or anyone else who dares get in the way.

The latest twist in what is the ongoing soap opera of the Jindal administration, Nichols has claimed that a $178.5 million year-end surplus has suddenly materialized, seemingly out of nothing more than the sheer will of Jindal to appear as a fiscal guru in his tragicomic pursuit of the White House.

LouisianaVoice, meanwhile, has learned that a national bond rating company isn’t buying into the rosy fiscal picture painted by the Division of Administration (D)A) and in fact, feels that by all previous measures, a budget deficit as claimed by Kennedy is the more likely scenario.

When Kennedy challenged the surplus figure, claiming instead that the state in reality had a $141 million deficit, Kristy’s vitriol was unleashed on the Treasurer in quick measure, claiming that Kennedy was responsible for “sweeping” agency funds that have not been appropriated or spent by the end of each fiscal year. She added that while the Treasury had used the money for cash flow, it never included it in the year-end report presented to the Joint Legislative Committee on the Budget (JLCB).

Nearly seven years into Jindal’s term, Nichols opined that it was “disappointing” that Kennedy never reported these balances to the public.

That, of course, should raise the obvious question of why no one in Jindal’s cadre of sycophants has raised the issue before now.

At the same time, Nichols denied Kennedy’s claim that the administration had changed the accounting system from accrual to cash. Bear in mind, however, it was this same Nichols who told the House Appropriations Committee on Sept. 25 (just before she ducked out to take her daughter to a boy band concert in New Orleans) that it was Buck Consultants who recommended a decrease in premiums for Office of Group Benefits members when the actual report submitted by Buck did nothing of the sort.

Kennedy, for his part, released a prepared statement on Wednesday, saying that as Treasurer, he is constitutionally responsible “for the custody, investment and disbursement of state funds. It is a job that I take very seriously. At least three times a year, the Treasury sends a comprehensive report to the administration about every penny, nickel and dime in the state general fund and the Treasury is audited every year by the legislative auditor.”

Kennedy also said that as Treasurer, he is not responsible “for ensuring that the administration is truthful with legislators and the public about the amount of money that can be appropriated from the state general fund. It is the administration’s responsibility to take our reports and tell legislators and the Revenue Estimating Conference about any and all available money instead of creating a secret slush fund.”

Kennedy said it is clear that the state spent more money than it brought in during the fiscal year that ended on June 30. “We have a $141 million deficit,” he said. “It’s also clear that the administration wants to use its own secret slush fund to resolve the problem while blaming others for the mess.” He called the administration’s figures “a manufactured surplus.”

“I don’t blame them,” he added. “I wouldn’t want to be held responsible for the bad budget practices that drove the Office of Group Benefits into financial ruin, drained the Medicaid Trust Fund for the Elderly, and crippled our universities. As Treasurer, I’ll continue to be a watchdog over the people’s money.” He said if the Legislature wants him to take charge of the budget, “I am more than happy to take on those responsibilities.”

Legislators will get a chance to ask their own questions when the JLCB convenes on Friday in the Capitol.

Meanwhile, Legislative Auditor Daryl Purpera said there no way of knowing if the administration’s claim of a $178 million surplus is valid until a thorough audit has been conducted.

“This is a different way of looking at what is surplus,” he said. “The bottom line is…until we have audited it, I can’t tell you if it’s a good number or bad number or what.”

In contradicting Nichol’s claim that the accounting system was changed by the administration, Purpera said the new figures represents a sudden departure from the method employed since 1997. “This is not the way they have calculated it before,” he said.

Even the administration could not verify the source of the surplus, saying only that it was “not exactly clear, but we are confident it is there,” according to DOA communications director Meghan Parrish.

Jindal desperately needs to avoid the prospect of a budget deficit if he is to continue his quest for the presidency. A budget hole at this juncture would severely wound, perhaps mortally, his oft-repeated claim that he has balanced the Louisiana budget every year of his administration.

That threat alone would go far in explaining the administration’s sudden frenzy in spinning a favorable fiscal tale contrived to propel him into the White House via fantasy land—or Iowa or New Hampshire.

Just another day in the wacky world of Jindini escapism, folks.

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Jindal’s latest accounting ploy bolsters disturbing perception that his administration is quickly mutating into ‘Enron East’

Posted in Book Review, Budget, Business, Contract, Contracts, Corruption, DOA, Ethics, Finances, Fraud, Governor's Office, Legislators, Legislature, Office of Group Benefits, OGB, Politicians, Privatization, Public Records, Revenue, State Agencies, Teague, Transparency on October 12, 2014| 33 Comments »

When Jeff Skilling took over as President and Chief Operating Officer of Enron in June of 1990, he did so only after insisting that the company convert from conventional accounting principles to a method preferred by his former employer, McKinsey & Co.

In 2001, hedge fund manager Richard Grubman said to Skilling, “You are the only financial institution that can’t produce a balance sheet or cash flow statement with their earnings.” By October of that same year, Enron had begun its death spiral in a historic collapse that would pull the giant accounting firm Arthur Andersen down with it.

The key to Enron’s failure was the mark-to-market accounting method, where anticipated revenues and profits are entered into the company’s books before they are ever received. The system allowed Enron to conceal losses and to inflate profits for nearly 11 years before its house of cards came crashing down.

On Thursday (Oct. 8), nearly seven years into his administration, Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) rolled out a new accounting formula with an alarmingly familiar ring to it.

Jindal, like Skilling, is a McKinsey alumnus.

Commissioner of Administration/Surrogate Gov. Kristy Kreme Nichols announced that the state, instead of having a deficit of $141 million as claimed by State Treasurer John Kennedy, will suddenly have a surplus of $178.5 million, a gaping difference of $319.5 million.

Nichols did not reveal how the $178.5 million was arrived at but Kennedy said the administration is switching to a cash balance form of accounting instead of the modified accrual basis employed by state governments. “If we use the methodology we have always used,” he said, “we don’t have a surplus. We have a $141 million deficit.

“The commissioner says the calculation has been inaccurate for years and it needs to be changed,” he said. “They have to explain why we have been doing it wrong all these years and why the Revenue Estimating Conference is doing it wrong.”

Nichols, an appointed state employee, was less than deferential to Kennedy, a statewide elected official when she sniped back at Kennedy, saying, “I’m surprised the treasurer is not reporting this.” She added that Kennedy is obligated to report available revenue. “He should probably do a review of the accounts to ensure there are no more outstanding revenues he is not reporting.”

Kennedy and Jindal have been at odds for years over fiscal policy, so it was no surprise to see Kristy Kreme, with her super-sized ego, get a little mouthy with the state treasurer. After all, she bolted from a House Appropriations Committee hearing on the Office of Group Benefits on Sept. 25 to take her daughter to a One Direction boy band concert at the New Orleans Smoothie King Arena where she watched from the comfort of Jindal’s executive suite.

Just as Enron misrepresented its finances for years, it now appears that the Jindal administration may be attempting the same tactic, prompting one political observer to say, “If cooking the books isn’t malfeasance, what is? The bond rating agencies and others rely on the CAFR (Comprehensive Annual Financial Report), where the year-end position is officially reported in decision making and they are not going to like this.”

Another Jindal critic asked rhetorically, “What happens when a state ends a fiscal year with a deficit of $141 million but the administration of the day pretends that there is actually a surplus of $178 million? I don’t think there is any precedent for such a thing ever happening anywhere. This is starting to sound like Enron!”

Odd as it may seem to make that comparison, the similarities between Jindal and Enron run much deeper than the latest developments surrounding the new accounting methods. Here are some points about Enron lifted from The Smartest Guys in the Room: the Amazing Rise and Scandalous Fall of Enron (Penguin Books, 2003), a probing book by Bethany McLean and Peter Elkind about the failed energy company: http://www.goodreads.com/book/show/113576.The_Smartest_Guys_in_the_Room

  • The Deutsche Bank once described Enron as “the industry standard for excellence.” Jindal boasted of instituting the “gold standard for ethics” in Louisiana.
  • When the chief accounting officer of Enron Wholesale expressed concern about wholesale electricity sales, she was reassigned. When another employee questioned Skilling on his claim that Enron was going to make $500 million, she was laid off that same day. When state employees or legislators complain or do not vote with the administration, they are teagued.
  • Pollster Frank Luntz said instability and chaos were defining features at Enron and the six company reorganizations in just 18 months were a “running joke” and that Enron’s lack of discipline was “destructive and demoralizing.” Jindal’s penchant for reorganization and reform has created a similar atmosphere within state government.
  • Enron sold assets and booked the one-time proceeds as recurring earnings. Nearly 40 percent of Enron’s 1998 and 1999 earnings came from sales of assets rather than from ongoing operations. Jindal over the past several years has sold state property, buildings, and entire agencies and turned state hospitals over to private entities.
  • Both Skilling and Jindal are alumni of the blue-chip consulting firm, McKinsey & Co., which wrote the Enron business plan and as far back as 1986, advised AT&T there was no future in the market for cell phones. McKinsey also was an advocate of mark-to-market accounting practices.
  • Both Skilling and Jindal thought—and think—like a consultant. Skilling felt that a business should be able to declare profits at the moment of the signing of an agreement that would earn those profits. But just because traders were reporting earnings under mark-to-market accounting, it did not necessarily follow that the money was in hand. See this link: http://theadvocate.com/news/10494146-123/jindal-budget-surplus-questioned
  • A Wall Street banker said of Skilling: “He’s either compulsively lying or he’s refusing to recognize the truth.” Another banker worried that Enron executives were not carrying out their fiduciary duties and questioned “sweetheart deals” negotiated by them.
  • Skilling believed that social policies designed to temper the markets were “wrongheaded” and counterproductive. “Wrongheaded” has been a favorite term invoked by Jindal whenever he has suffered setbacks at the hands of the courts on issues ranging from education reform to a revamp of state retirement plans.
  • When asked a question he didn’t like, Skilling, in a tactic learned from his days at McKinsey, responded by dumping “a ton of data on you.” Jindal’s one outstanding skill is to spew statistics and factoids in rapid-fire fashion that can overwhelm and confuse challengers.
  • Skilling, like Jindal, was considered brilliant and extremely articulate. He, like Jindal, always seemed to have the right answer and whenever he was asked about problems it was always someone else’s fault.
  • Skilling displayed no remorse for his own actions, nor did he have any sense that he hired the wrong people or emphasized the wrong values. (See above.)
  • Enron founder Ken Lay saw himself as a business visionary, much as Jindal portrays himself as a policy guru. Lay traveled the world to offer his wisdom on everything from energy deregulation to corporate ethics to the future of business. (Ditto)
  • At the end, Enron employees’ accounts were frozen even as top executives were walking away with fortunes.
  • Efforts by Enron and Arthur Andersen to avoid reporting $500 million in losses “only pushed the problem further off and added another tangle to the fragile web of accounting deceptions.” Do we really need to elaborate here?
  • Enron executives accepted the argument that wealth and power demanded no sense of broader responsibility which in turn led them to embrace the notion that ethical behavior requires nothing more than avoiding the explicitly illegal, that refusing to see the bad things happening in front of you makes you innocent and that telling the truth is the same thing as making sure no one can prove you lied.
  • Enron’s mission was nothing more than a cover story for massive fraud, much as Jindal’s administration is being exposed almost daily as a sham. The story of Enron, like that of Jindal, was a story of human weakness, of hubris and greed and rampant self-delusion, of ambition run amok, of a business model that didn’t work and of smart people who believed their next gamble would cover their last disaster—and most of all, of people who couldn’t—or wouldn’t—admit they were wrong.
  • Enron once aspired to be “the world’s greatest company” but rather became a symbol for all that was wrong with corporate America, exposing Lay’s flaws as a businessman that could no longer be hidden behind Enron’s impressive but misleading façade and Skilling’s glib rhetoric.
  • Despite Enron’s efforts to camouflage the truth, there was more than enough in the public record to raise the hackles of any self-respecting analyst (read: reporter). Analysts (read: reporters) are supposed to dive into a company’s financial records, examine footnotes and even elbow their way past accounting obfuscations. Their job, in short, is to analyze (re: report).

In the end, of course, Enron crumpled under the weight of its own corruption and mismanagement, destroying thousands of lives and even taking down one of the big five accounting firms in the process.

The Jindal administration with each passing day, with every revelation of some new scandal (the Edmonson Amendment, CNSI, the Murphy Painter fiasco, et al) and with each new flawed policy (the Office of Group Benefits debacle), is looking more and more like a train wreck that will adversely affect Louisiana citizens for years to come.

Just call it Enron East.

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July 2014 Buck Consultants OGB report, emails contradict committee testimony of DOA Commissioner Kristy Kreme

Posted in Contract, Contracts, DOA, Ethics, Governor's Office, Health Care, Legislature, Legislators, Office of Group Benefits, Privatization, Public Records on October 8, 2014| 31 Comments »

If the Retired State Employees Association (RSEA) goes forward with filing a legal challenge to the proposed changes to health care coverage for state employees, retirees and their dependents, it may have a significant hook on which to hang its case in a report submitted by a company contracted by the Jindal administration which attempted to base its plan changes at least in part on that same report.

If you’re confused, you should be for Commissioner of Administration Kristy Nichols laid the decision to make the changes in the Office of Group Benefits (OGB) plan at the feet of Buck Consultants but the firm’s report is in direct contradiction to the testimony of Nichols at the Sept. 25 hearing of the House Appropriations Committee.

The proposed health benefit changes are so radical for some 230,000 OGB members that the RSEA has scheduled a meeting with a law firm which has tentatively agreed to take the case on a pro bono basis, says Frank Jobert, RSEA’s executive director. http://theadvocate.com/sports/southern/10465870-123/retirees-considering-legal-challenge

RSEA is looking at the failure to go through the necessary legal procedures for approval of changes in plan benefits and “diverting” money from the OGB fund balance which has dwindled from a high of more than $500 million to less than half that amount and which is projected to go broke next year if changes are not implemented.

Nichols has consistently blamed the financial condition of OGB on rising costs she attributed to the Affordable Care Act (Obamacare). Critics, however, point to three straight years of decreased premiums that allowed the state to commit fewer state funds to its 75 percent match which in turn allowed the administration to divert those monies to cover budget holes even as the reserve fund continued to shrink.

Nichols was consistently evasive when asked during last month’s hearings of the House Appropriations Committee, three times managing to evade the direct question of who the actuary was who recommended decreases in premiums over three consecutive years.

Finally, State Rep. John Bel Edwards (D-Amite), who had already asked the question once without getting an answer, observed, “In fiscal 2013, there was a 7.11 percent reduction in premiums followed by 1.8 percent even though health care costs were going up by 6 percent.”

In questioning Nichols during the Appropriations Committee hearing, Edwards had accused the administration of taking a “self-manufactured crisis” and turning it into an emergency “because we had a fund balance that was healthy.

“We had OGB members who were relatively happy with the plan and today we have an unhealthy fund balance and OGB members who are very unhappy.”

He then asked again, “What actuary told you these reductions were sound?”

Nichols, who was already halfway out the door—before the committee meeting adjourned—on her way to taking her daughter to a One Direction boy band concert in the New Orleans Smoothie King Arena where she watched from the luxury box assigned to Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana), replied, “Buck Consulting recommended a 2.25 percent decrease for calendar 2012.”

https://louisianavoice.com/2014/10/01/watching-kristy-kreme-nichols-responding-to-legislators-like-watching-jerry-lewis-movie-mixture-of-exasperation-humor/

Well, not exactly. When one reads pages ii and iii of the summary report of the Buck Consultants Actuarial Valuation at 7/1/2013, a starkly different message is conveyed.

http://www.doa.louisiana.gov/osrap/library/afr%20packetts/2014OGB_OPEBValuationReport.pdf

On Page ii, under the CLAIMS AND PREMIUM EXPERIENCE heading, the report says:

  • “Overall, the plan had favorable claims experience, resulting in a gain. The gain was offset by losses associated with premiums not increasing as expected. See Substantive Plan discussions below.”

Under SUBSTANTIVE PLAN on Page iii, the report says:

  • “It is our understanding that the Plan premium rates, used both to determine contributions from the various employer agencies and to set contributions required from the retirees, were set artificially low to draw down the OGB’s reserve fund… (emphasis added.) As noted above, premium rates were again lower than expected for this year’s valuation.”

Moreover, an email from Buck Consultants representative Tom Tomczyk to OGB CEO Susan West dated Sept. 28 (three days after the Appropriations Committee hearing) says, “The 2.25percent (rate decrease) was not a recommendation for January 1, 2012, but only used to validate our projections for the Fiscal Year 2012-2013. We did not recommend a decrease of 7 percent effective August 1, 2012, or an additional decrease of 1.77 percent effective August 1, 2013. Further, we were not asked to provide any recommended rate adjustments for any fiscal year beyond what we provided for Fiscal Year 2012-2013.”

In fact, according to that same email, Tomczyk said Buck Consultants was asked in late 2011 for its projection of the indicated rate increase for Fiscal Year 2012-2013. “At that time, based on the most recent claims information available, we projected a rate increase (emphasis added) of 1.75 percent needed as of July 1, 2012.”

An earlier email, on Nov. 12, 2013, from Tomczyk to West’s predecessor, Charles Calvi, who served as CEO of OGB from Jan. 9, 2012, to Jan 31, 2014, concluded, “We have not been asked to provide recommendations for rate adjustments since calendar year 2012.”

The consulting firm’s report, dated July 2014, noted significant decreases in several areas of net liabilities to OGB and gains in areas that benefitted the agency’s bottom line, according to two financial experts who were shown the report.

“As I see it, the Buck report directly contradicts the way Ms. Nichols has presented this,” one said. “Unless I do not understand plain English, Buck says, ‘Overall, the plan had favorable claims experience, resulting in a gain.’ How can a clear gain be a loss by anybody’s definition?”

He noted the following:

  • The actuarial accrued liability (AAL) for July 2013 was $103 million less than what had been projected in July of 2012, meaning that OGB was in better shape on July 1, 2013, than had been predicted. The AAL also increased by only $157 from last year when it had been projected to increase by $260 million.
  • The amount paid in claims was less than predicted and actually decreased the AAL by $195 million—and would have decreased it even more had premiums not been less than projected.
  • The report clearly attributes a loss to OGB of $388 million—totally a result of reduced premiums through Fiscal Year 2012 and that this loss was increased by additional decreases in premium rates in Fiscal Year 2013.
  • The report, on Page iv, minimizes the effect of the Affordable Care Act (ACA) on these calculations and points out that the ACA provided improvements in Part D coverage.

“I am frankly shocked at this report and what has been said about this whole thing by others,” he said. “Either I am totally stupid or it blows all previous explanations away.”

Edwards, commenting on the contents of the Buck Consultants report, said, “Nothing in this supports Kristy Nichols.”

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MedImpact problems abound for OGB members; Gingrich, Tauzin linked to company through separate organizations

Posted in DHH, DOA, Health Care, House, Legislature, Office of Group Benefits, OGB, Office of Group Benefits on October 4, 2014| 12 Comments »

You wouldn’t ordinarily expect to see the names of two prominent former congressmen bob to the surface when discussing a health care benefit program for state workers in Louisiana.

But when Office of Group Benefits (OGB) switched to MedImpact, a San Diego company, to provide its prescription drug benefit management services on Jan. 1, the state awarded an 18-month, $350 million contract to a company tied to the 2007 Republican presidential nomination quest of former U.S. House Speaker Newt Gingrich. http://hl-isy.com/Products-and-Services/Pharmacy-Benefit-Evaluator/PBE-Abstracts/2012/MedImpact

And those who listened to testimony last week before the Louisiana House Appropriations Committee learned that the company has proved to be less than satisfactory in handling claims for pharmaceutical benefits.

Gingrich launched the Center for Health Transformation as part of an ambitious consulting and communications conglomerate to let consumers, not health maintenance organizations (HMOs), choose their doctors, medical treatments and hospitals.

While the concept might be a good one on the surface, Gingrich failed to reveal that his idea would greatly benefit drug manufacturers, health insurers and other health care professionals who paid up to $200,000 annually to participate in the center’s operations.

MedImpact was one of those companies who ponied up the big bucks for that privilege.

Sid Wolfe, director of health research for the watchdog group Public Citizen, called Gingrich’s taking money from organizations like MedImpact and then using the weight of his name to advance the interests of those organizations “a massive financial conflict of interest.”

And when Gingrich again flirted with seeking the GOP presidential nomination in 2012, one of the men he chose to co-chair his Florida chairman was Alan Levine, former Secretary of Louisiana Department of Health and Hospitals under Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) and former Secretary of Health Care Administration for former Florida Gov. Jeb Bush.

Even former Congressman Billy Tauzin of Louisiana has entered the picture as co-chair of Medicine Access and Compliance Coalition (MACC), an assortment of health care providers who advocate lower drug prices through the federal 340B Program. http://www.huffingtonpost.com/2013/08/13/billy-tauzin-drugs_n_3719468.html

Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in the Medicaid drug rebate program to provide outpatient drugs at discounted prices to taxpayer-supported health care facilities that provide care for uninsured and low-income people. http://www.aha.org/content/13/fs-340b.pdf

The program allows eligible hospitals and community health centers to reduce pharmaceutical costs to patients.

That would seem to be a radical departure from Tauzin’s previous position as head of the Pharmaceutical Research and Manufacturers of America (PhRMA).

You may remember how in one of his last official acts as Congressman from Louisiana’s 3rd District Tauzin of Chackbay in Lafourche Parish, pushed through that 2003 bill that prohibited the federal government from negotiating pharmaceutical costs for Medicare patients. http://www.nola.com/politics/index.ssf/2013/08/ex_rep_billy_tauzin_smack_in_t.html

Right after that legislative coup, the Democrat-turned-Republican went to work for PhRMA, eventually earning an eye-popping $11.6 million per year. http://www.bloomberg.com/news/2011-11-29/tauzin-s-11-6-million-made-him-highest-paid-health-law-lobbyist.html

No sooner had MedImpact came forward with its presentation on ways in which hospitals may be missing out on opportunities to profit from 340B. In that presentation, MedImpact promised hospitals that it could work “with any wholesaler, pharmacy or claims processing service,” providing hospitals “with the lowest prices, maximum flexibility and revenue.”

Then, last December, OGB sent a letter to its members informing them that MedImpact would begin providing pharmacy benefit management (PBM) on Jan. 1. CCF10032014_0001

Medicare-eligible retirees and their Medicare-eligible dependents would be covered by MedGenerations, a subsidiary of MedImpact, supposedly under that same $350 million contract given that there was no separate contract listed for MedGenerations.

Horror stories about MedImpact and MedGenerations began emerging almost immediately.

A Nightmare called Bobbycare: prelude to healthcare ruin (alternate headline: the time has come to privatize Jindal)

Henry Reed, a retired State Fire Marshal’s office employee, testified before the House Appropriations Committee on Sept. 25 that he fought FEMA for hurricane recovery money on behalf of the state but has experienced nothing but frustration with the state’s pharmaceutical management service. A victim of both epilepsy and narcolepsy, Reed said he has to take one medication that costs $2,000 per one-month supply.

His doctor prescribed two pills per day of that medication but “Medimpact informed me they would pay for only one pill per day. Apparently someone sitting at a desk in California knows more about my condition than my doctor.

“I thought I had a good health plan,” Reed said. “I called OGB and they referred me to Medimpact.”

The company simply refused to even approve prescription medications for the son of OGB member Dayne Sherman until he was forced to jump through all types of bureaucratic hoops to get the prescription approved.

So, what is the motivation for Medimpact to arbitrarily cut medications in half or to refuse them outright? Does it get to keep that part of the $350 million that isn’t spent on medications? Does it receive some other incentive to deny or reduce claims? Has it taken lessons from the McKinsey Group, which taught Allstate and State Farm how to delay, deny and defend claims stemming from Hurricane Katrina?

And for that matter, what do MedImpact’s employees think of their employer?

A sampling of postings on a web page that lets employees rate their employers anonymously is not kind to the company:

  • “They can pay you well and give good benefits in exchange for your soul.”
  • “No one is encouraged to think about what they are doing and try to make it better. The leadership team is completely disconnected.”
  • “Great people to work with; lousy leadership.”
  • “Strange, secretive leadership. A lack of clarity, vision and generally poor downward communication.”
  • “Lack direction, unorganized and management sucks.”
  • “Upper management tends to chase bright shiny objects. Burnout is high.”

You can read more here: http://www.glassdoor.com/Reviews/MedImpact-Reviews-E40035.htm

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Watching Kristy Kreme Nichols responding to legislators like watching Jerry Lewis movie: mixture of exasperation, humor

Posted in Contracts, DOA, Governor's Office, House, Legislature, Legislators, Office of Group Benefits, OGB, OGB, Office of Group Benefits, Privatization, Revenue on October 1, 2014| 23 Comments »

Listening to Commissioner of Administration Kristy Kreme Nichols’ responses to questions during last Thursday’s House Appropriations Committee hearing over changes to the state Office of Group Benefits (OGB) health plans, one word kept coming to mine: bromides.

Bromide is defined by Merriam-Webster as “a statement that is intended to make people feel happier or calmer but (which) is not original or effective,” and by Wikipedia as “a phrase or platitude that, having been employed excessively, suggests insincerity or a lack of originality in the speaker.”

No matter which definition one might choose, that is precisely what legislators and members of the audience were treated to during the seven-hour hearing at the State Capitol.

Keep in mind as you read this that subsequent to the hearing last Thursday, the administration of Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) retreated from its plans of the gang rape of 230,000 state employees, retirees and dependents so that the administration can follow the law for a change and proceed through the legal process of obtaining approval of the proposed benefit changes for OGB members. https://louisianavoice.com/2014/09/30/in-need-of-aloe-vera-after-being-burned-by-appropriations-committee-last-week-ogb-announces-enrollment-extension/

Katrina Jackson (D-Monroe), for example, sparred with Nichols on the issue of the $1.3 million contract with Ansafone, Inc. of San Diego and Ocala, Florida to field phone calls from OGB members. “Where is the project work plan?” Jackson asked. “No one at OGB knew what it was when I called. No one on the committee has received any project work plan. We have a $1.3 million contract for phone service. Is this something that Blue Cross/Blue Shield (BCBS) should be doing?”

“We had no other choice but to ramp up our customer service for open enrollment,” Nichols said.

Jackson again asked if fielding questions from members should be something BCBS should be doing to which Nichols responded, “OGB has always retained a customer service component.”

Jackson said legislators were told three years ago that privatization of OGB “would be helpful to members, not harmful. We fixed something that was not broken and now it’s broken. We were doing pretty good but then for some reason we offered the business to BCBS, everyone shifts to that and our utilization costs go up.”

Jackson finally got Nichols to concede that utilization is a major issue. “Vendors have to 100 percent accountable for managing utilization with us. To the extent that the request for proposals (RFP) and current contract did not explicitly mandate that, we need to in the future.”

We’re glad we could clear that up for you.

Kenny Havard (R-Jackson) asked Nichols why the Administrative Procedures Act, which lays out a step by step procedure for the adoption of rule changes. For a complete list of APA requirements, click here: apa

“We are,” Nichols said.

“You’re doing that now,” Havard countered. “But you didn’t before. If you’d done it before, we wouldn’t be here now. Who decides what laws we have to follow and which ones we do not have to follow in this?”

“The legislature sets laws and we try to follow,” Nichols replied.

“Everything we do lately ends up in court and that’s exactly where this is heading,” Havard shot back. “We’ve created a problem that we’ve put on the backs of state workers. We have people making $500 a month and you’re about to raise their insurance (costs) and somebody needs to answer for it because we’ve created a problem and blaming it on somebody else. I don’t support Obamacare but I also don’t support Jindalcare.

“We lowered premiums so the state would not have to put up its share and now the fund balance is dwindling,” he said. “I just want to know who made the decision that we didn’t have to follow the APA.”

“We are following the APA,” Nichols continued to insist. In our opinion, the plan of benefits does not have to be promulgated because it’s in the OGB authority.”

State Sen. Ed Murray (D-New Orleans) attempted to question Nichols but soon grew frustrated at her evasiveness and gave way to Rep. Greg Cormer (R-Slidell) who asked but did not receive a definitive answer: Did an actuary give the opinion on the rate decrease of 7 percent? Cormer told OGB CEO Susan West, “If you were a private insurer, the Department of Insurance would have already taken you over” because of the agency’s mismanagement.

Jack Montoucet (D-Crowley) asked Nichols, “Where would OGB be today had we not made all the changes, if we’d left them alone and let them do their job? To me, it wasn’t broken. I never got a call in six years (prior to privatization) complaining about OGB. Today, I gotta tell you, Jesus Christ, I’m getting phone calls every day and this (new plan) hasn’t even been implemented. That’s scary.”

Nichols, as she did most of the day, stammered and fumbled for an answer. “All public employee health plans are experiencing the same thing,” she finally said, but then said that the cost increases “could have been prevented if we’d structured the HMO correctly in the beginning.”

Joe Harrison (R-Gray) went further than the others in calling for a special legislative session to deal with the OGB crisis and noted that there were no problems with the agency during the tenure of Tommy Teague, who was fired as CEO on April 15, 2011.

“Mr. Teague had a solvent plan and I’ve yet to hear any in the administration tell me why we moved away from that plan,” Harrison said.

“I would ask that we have a special session on this,” he said. We have more than 200,000 lives we are adversely affecting. There are other options to this. Many in the insurance and health care industry have looked at this and (have) said there are better ways to go.”

The hardest questions, however, came from Rep. John Bel Edwards (D-Amite). Following up on a question asked earlier by Rep. Greg Cromer (R-Slidell), Edwards asked if the recommendations for premium decreases three consecutive years were made by an actuary.

“I was not with OGB then,” West said. “I don’t have that information with me…”

“It’s been three hours since that question first came up,” Edwards said.

“I don’t have that information with me,” West repeated.

“It’s been three hours since that was asked,” Edwards said again. “That’s three hours in which those reports could have been brought over here. Who made the decision to reduce premiums by 9 percent total in fiscal years 2013 and 2014?”

“Ultimately, the administration,” Nichols said.

“The OGB director?”

“I wasn’t at DOA in fiscal year ’13,” Nichols said. “I don’t know where the recommendation came from.

When Edwards elicited testimony from Nichols and West that the OGB policy board had not met in more than a year even as the OGB fund balance was dwindling by $16 million per month, he asked, “Was there a lack of a quorum because there weren’t enough members appointed to the board (by the governor) or that they weren’t showing up for meetings?”

“A combination of both,” West said.

“So we have a situation where (the decision was made) to reduce premiums by 2.25 percent in 2012 which drained the fund balance by 3 percent knowing costs were going up 6 percent, and an additional reduction of over 7 percent the next year and an additional reduction of almost 2 percent the following year all the while with costs of health care going up and we were surprised that the fund balance went down?

“This is a self-manufactured crisis that you are now saying is an emergency because we had a fund balance that was healthy,” Edwards said. “We had OGB members who were relatively happy with the plan and today we have an unhealthy fund balance and OGB members who are very unhappy. In fact, I would not that not a single OGB member came to testify today who support any of those plans—not a single one of them.”

Edwards if there was to be discussion of stability for OGB, “we can’t leave it in the hands of whoever’s been running it for the last two years…”

He then asked Nichols when the decision was made to follow the rule of promulgation as mandated in the APA.

“The general counsel advice to OGB,” Nichols said, “was a plan of benefit changes should not be required to be promulgated…”

DOA general counsel Liz Murrill stopped texting long enough to interject, “We had the conversation at the beginning of September.”

“When was the decision made?” Edwards repeated.

“At the beginning of September,” Murrill said.

“The (OGB policy) board looked at what you wanted to do in July so you knew what you wanted to do by July 30. If you had started the rule promulgation process by August 30, you could get through the entire process before January 1. You didn’t do that.”

Nichols, in a weak attempt to defend the emergency rule procedure in lieu of promulgation, asked, “Why was OGB allowed to implement 41 emergency rules in the past?”

“I suspect because nobody challenged it,” Edwards shot back. “Typically, you don’t follow the law unless you get challenged and that’s the real precedence that you’re following.”

Saying a Pew Survey shows that Louisiana is the third stingiest state in the nation in providing health coverage for public employees, Edwards said there is a “tremendous disconnect between saying we had an inflated reserve fund that it needs to be right-sized and today saying we have an emergency because the fund balance is not enough and it’s on its way (from a high of $520 million) to $8 million.”

He then again asked the question that no one had answered to that point. “In fiscal year 2012 there was a 3 percent erosion of the fund balance. Yet, in fiscal 2013, there was a 7.11 percent reduction in premiums followed by 1.8 percent even though health care costs were going up by 6 percent. What actuary told you those reductions were sound?”

“Buck Consulting recommended a 2.25 decrease for calendar 2012,” Nichols said.

“If you don’t have an emergency, then what you’re going to start on January 1 is invalid and you’re causing a bigger problem than if you simply go through the ordinary rule making process,” Edwards said. “Anyone who’s adversely impacted by having to pay a higher deductible or higher co-pays by an invalid emergency rule has a right to have that money returned to them.

“The safest thing to do if you are really worried about the taxpayers of the state of Louisiana is to give very serious thought to stopping the emergency rule making process, go forward with the ordinary rule making process and have whatever plans survive that process implemented in a year that doesn’t start until they (the rules) become final.

“Public meeting notices, meeting requirements, and oversight by the legislature are all very, very important. We had people today saying this was the first opportunity that they had to come and voice their objections. That’s an important part of this whole process.”

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