Here is the relevant statement from Peterson:
Friday, the Centers for Medicaid and Medicare Services (CMS) announced that they were rejecting the Jindal administration's application to privatize our state's Charity Hospital system. In plain terms, CMS, the Federal department that oversees the Medicaid program, told the Jindal admin that their scheme for financing the privatizations was not legal under Medicaid rules. Despite the protestations of the Jindal admin, this ruling comes as no surprise. Repeated warnings preceded this final decision, and despite those warnings, the Jindal admin continued to sign deals to privatize hospitals over the past 18 months. PAR now estimates this rejection could cost the state over $440m in future state budgets, an incredible burden that torpedoes our already shaky state fiscal situation (read more here).
To fully understand the consequences of this decision, it is important to track the sequence of events that led us here. Back in the summer of 2012, the Jindal admin stood by and watched as Congress slashed Medicaid reimbursement rates for Louisiana, dooming the Charity hospital system's fiscal model (revisit the history here). Passively standing by while Republicans in Congress made these changes, the Jindal administration instead pivoted to dismantling the Charity system itself.
In December of 2012, the LSU Board of Supervisors approved ongoing negotiations with private health care providers to take over Charity hospitals all over the state. Throughout the spring, much was made about the unclear and inchoate deals, reflecting confusion about the financing model and potential impacts to essential Federal reimbursement for health care costs.
By April of 2013, the Jindal Admin announced it had reached deals for an initial round of Charity Hospital closures and privatizations. The full Legislature initially balked at this unilateral action. The Senate passed a resolution requiring Legislative approval of such deals. But the Jindal Administration ignored this directive.
In May of 2013, I, along with several of my Senate colleagues, asked CMS to advise the state on the potential approval of the privatization deals in order to give the Administration and Legislature guidance on the appropriateness of their actions. You can read the full letter to CMS and the responses here. At the time, CMS warned, "the state may not claim Federal Financial Participation funds [reimbursement] on pending or unapproved state plan amendments." This dire warning indicated the consequences of a disapproval.
Last June, I voted against the State budget precisely because of the irresponsible reliance on "up-front lease payments" from the hospital deals, a key maneuver by the Jindal Admin to plug short-term budget holes (click here for my statement). The privatization deals included large, up-front pre-payments years in advance that the Administration would use to "match" Medicaid dollars, there-by bringing in more Federal health care dollars in the short term (click here for a review of the debate last year). This tactic provided budgetary relief in the short-term, but presaged massive budget problems in the future. The ultimate "robbing Peter to pay Paul" scenario.
Critically, the 2013 agreements to privatize the Charity hospitals contained tens of blank pages, evidence of bad deals rushed ahead to deal with budget problems created by Jindal's difficulty paying the state's bills. Despite these blank pages, the Jindal Admin pressured the LSU Board of Supervisors to approve the deals, ensuring taxpayers would be bilked by rash decision making (Learn more about the contracts here).
Around the time that the Administration pushed through a budget heavily reliant on the shaky financing from the privatization plans, I asked a former LSU Hospitals chief Dr. Fred Cerise to further advise us on what could happen if things went south with CMS. His advice concluded, "If they are ruled to be non-allowable payments by CMS then the state will have to repay those funds that the Administration intends to use in the budget this year." Read the whole thing here.
Now we arrive in 2014, with considerable evidence in the record that the approved deals relied upon a CMS approval that was questionable at best, CMS warned the Jindal Administration that the State would be on the hook for any Federal funds used in deals that had not been approved. Weeks later, CMS ruled as they had indicated all along: that this specific scheme for privatizing Charity hospitals would not be approved for Federal reimbursement (read the Advocate on the rejection here).
The consequences of this long, and dishonest, pursuit of Federal health care dollars to finance the privatization of our Charity system are profound. An expert from PAR indicates that without an unlikely reversal of this decision, Louisiana taxpayers are on the hook for more than $440m not currently budgeted for in the coming years. To note, Medicaid dollars account for almost a third of our State budget.
Moving forward with these deals, despite all the warning signs, is gross negligence on behalf of the Jindal Administration. Our health care system is in serious risk of chaos as a result of the Jindal Administration's irresponsible actions. If Bobby Jindal were a doctor, Louisiana would be suing him for malpractice.