$2M savings may result in $42M loss for La. Medicaid

Source: David Hammer, WWL, March 8, 2017

When former Gov. Bobby Jindal’s administration ended a $2 million debt-collection contract in 2014, nobody batted an eye. After all, the state faced a mind-blowing $1.6 billion budget deficit and welcomed any bit of spending that could be cut. But that small savings may have actually created a $42 million loss for the state’s federally funded Medicaid program over the last two years. That’s more than the $40 million the Legislature recently had to slash from the Health Department to cover yet another budget shortfall. By letting a contract with New York-based HMS expire in December 2014, the state went more than 14 months without anyone identifying and recovering money for Medicaid bills that should have been paid by third parties – like an auto insurance company on the hook for a Medicaid recipient’s health expenses after a crash, or a private health insurance plan that should have covered an illness but didn’t, instead leaving Medicaid, the taxpayer-funded payer-of-last-resort, holding the bag.

.. When Gov. John Bel Edwards took over last year, his Department of Health was facing $29 million in these uncollected third-party liabilities. And the former contractor responsible for collecting third-party liabilities, HMS, was embroiled in a trade-secret lawsuit with a competitor, Public Consulting Group Inc., which was also seeking the collection contract in Louisiana. Finally, Public Consulting Group settled the lawsuit last year and agreed to not compete with HMS for contracts for seven years. Louisiana rehired HMS under a $2.1 million emergency contract last summer. According to a state legislative audit, HMS estimated the uncollected amount of third-party liabilities at $42 million by the end of 2016, but because of the large gaps in collections work, the Department of Health couldn’t be sure of that figure. … But the audit also identified $18 million in receivables the state may never be able to recover. … There was some hope that by shifting to what’s called a managed-care payment system, the state’s Medicaid program wouldn’t need to pay a company like HMS to collect third-party liabilities; the private managed care organizations hired by the state to make Medicaid payments would take care of that duty. But a significant portion of Medicaid costs in Louisiana are still paid under the old fee-for-service model, without a private managed care organization acting as a middle man. …