Louisiana spent $2.4B to improve Medicaid. A lot of the money went to administrative functions.

by Julie O’Donoghue, Louisiana Illuminator
March 11, 2025

Louisiana spent nearly $2.4 billion over five years on hospital programs meant to improve health care outcomes for people in the Medicaid program. Yet hundreds of millions of dollars of that funding went to administrative functions not directly related to improving patients’ lives, according to a report from the Louisiana Legislative Auditor’s office released Monday. 

The Manage Care Incentive Payment program [MCIP] allows the six private health insurance companies who manage Louisiana Medicaid to receive a 5% higher rate per enrollee if they provide better outcomes for Medicaid recipients and deliver health services efficiently. 

It is supposed to promote services such as cancer screenings, blood testing for diabetics, identifying childhood obesity, smoking cessation and reducing emergency room trips for Medicaid patients.

But the majority of  Louisiana’s MCIP funds have gone toward activities that do not enhance the health of Medicaid beneficiaries, Legislative Auditor Michael Waguespack said in a letter attached to his report. 

The auditor raised questions about spending in the program from September 2019 through March 2024. Gov. John Bel Edwards was in office for all but the final three months of that period.

During that time, the health department paid out $437.2 million of the program’s $2.39 billion for submitting reports correctly, meeting deadlines and holding annual meetings – functions the auditor said are not directly related to improving Medicaid patients’ health. 

Additionally, the health department spent just $440.2 million (18%) of the total funding on reaching health care goals that the auditor could measure and verify. The remaining $1.5 billion (45%) was spent on goals that could not be assessed by an outside party, according to the report.

The auditor also concluded that $1.1 billion (45.3%) of the $2.39 billion in total funds were used for activities other than payments to the hospitals that provided the program services. 

The state health department has agreed to make changes the auditor recommended to promote accountability in the Medicaid improvement program.

But leaders with the Quality and Outcome Improvement Network, which is part of Ochsner Health and ran one of the programs in question, strongly disagreed with the auditor’s conclusions, issuing a 26-page rebuttal.

“A performance audit should address the performance of the program, and the Report does not,” network executive director Lane Sisung said in response. 

In practice, Louisiana’s largest hospital systems were left in charge of executing MCIP, though the health insurance companies who run Medicaid received $71.8 million from the health department before passing off the rest of the money to the entities offering the services.

“[The state health department] has not monitored how the [health insurance companies] or [networks set up by hospitals] have used MCIP program funds despite having the authority to do so,” Waguespack wrote.

Sisung, in the response from the Ochsner network, said the auditor underestimated the impact of spending money to set up the services made to improve health outcomes. Some investment was necessary up front in order to see improvements in bloodwork for diabetics, for example.

“[Managed Care Incentive Payment] teaches a person to fish, rather than handing them fish,” Sisung wrote. 

But the state’s approach to running the incentive programs likely also drove up administrative costs. Ochsner and the other major hospital systems in Louisiana did not want to work together, so the state created two independent networks to tackle Medicaid improvements.

The Quality Improvement Network, or QIN, involves hospitals Ochsner owns and manages. The Louisiana Quality Network, or LQN, is made up of other hospital systems, including Franciscan Missionaries of Our Lady Health, LCMC Health and Willis-Knighton. 

The state health department gave each network different goals and public health problems to tackle that did not overlap with each other. For example, the Ochsner network was to focus on improving diabetic outcomes and lowering emergency room visits, while LQN worked on improving breast cancer screenings and early autism detection. 

The auditor appeared particularly frustrated with the QIN run by Ochsner, which refused to turn over all the financial documents the auditors office requested. Waguespack said the lack of transparency from QIN potentially violates the Louisiana Constitution, which prohibits certain types of payment structures for public programs. 

Sisung strongly disagreed with this assessment in the network’s response. 

Representatives from the Louisiana Quality Network struck a far more agreeable tone to the auditor’s suggestions for improvement but also pushed back on some of his assertions. In their joint response, network leaders said the federal government, which provides for most of the program’s money, allows for the current structure of the incentive payments, and that the state may not have the authority to impose tighter restrictions. 

“Federal law does not dictate how providers or contractors ‘use’ Medicaid payments once received in exchange for services provided or incentive milestones met,” they said in a letter to Waguespack.

Louisiana Illuminator is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Louisiana Illuminator maintains editorial independence. Contact Editor Greg LaRose for questions: info@lailluminator.com.

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