Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE

July 6, 2015

Bayou Health May Be Curbing Cost, But Issues Found with Reported Savings

While the state's first managed care system for residents enrolled in Medicaid may be saving the state money by curbing cost growth, auditors found issues with some of the savings reported by the Department of Health and Hospitals (DHH), according to an informational report released Monday by Legislative Auditor Daryl Purpera.

Based on a trend analysis from fiscal years 2009 through 2014, auditors determined that "Total Medicaid expenditures over the six-year period have increased by more than $1.2 billion, or 19%. When comparing this growth to the Bayou Health cost growth of only 13%, the analysis notes that Bayou Health may be saving state money by curbing cost growth."

The analysis by the state auditor's Financial Audit Services staff follows a 2014 LLA informational report titled Consideration of the Bayou Health Transparency Report and a revised savings analysis that the Department of Health and Hospitals (DHH) presented to the House Appropriations Committee in March 2015.

In response to the 2014 LLA report, DHH said the state would save approximately $17 million in the Shared Savings model of Bayou Health. Auditors determined that the $17 million figure is supported by calculations from DHH's contracted actuary.

However, auditors could not verify the DHH's claim to the House Appropriations Committee this past March of an average $24.97, or 9 percent, reduction in per member per month cost from Bayou Health. "Because DHH extracted data using date of service instead of date of payment, data cannot be reconciled to DHH's financial accounting records or the amounts reported by DHH in federal financial reporting. In addition, actuaries were not used to review the methodology, review the calculations, or validate the underlying data," the report said.

Also, auditors questioned whether Bayou Health actually achieved its reported fiscal year 2013 (the first full year of Bayou Health) savings of $135.9 million. "While DHH did meet its budget expectation for the Medicaid Buy-In category as a whole, the line item budget for Bayou Health was not achieved, even after a mid-year budget adjustment of more than $118 million," auditors wrote. In its response to the report, DHH said the $135.9 million estimate was made before the agency decided to add pharmacy services into the Prepaid model.

DHH also reported in 2014 that Bayou Health is saving $29.55 per member per month over legacy Medicaid. However, "the savings stated by DHH only refer to the comparison of legacy Medicaid to the Prepaid Plans, not to Bayou Health as a whole," according to the report.

For more information contact:

Legislative Auditor
225.339.3800



###

Office of the Louisiana Legislative Auditor | www.LLA.La.gov