Easy choice for health spending reductions: nursing homes

Assuming the House’s budget-trimming zeal on the state’s operating budget HB 1 survives, choices must be made in cutting requests for health care spending. While the reduction as a whole (which is still an increase over last year’s amount by almost 4 percent, of which the state’s increase in operating appropriations is increased about 20 percent) may seem difficult for Department of Health and Hospitals Secretary Alan Levine, the choice where the majority of redacted spending should come from is easy.

Four areas could face reductions, all dealing with payments to providers of medical services: doctors, hospitals, community care agencies, and nursing homes. The first two mainly would involve reimbursement for Medicaid in the treating of the indigent. This would not be wise as the state looks to move away from its institution-based system of care that has created an inefficient, underperforming charity hospital network. Already reimbursement costs are among then lowest in the nation, so to encourage less state government involvement and more private sector and nonprofit involvement in indigent care, reimbursement rates if anything would need to go higher.

Community care agencies form the bedrock of community-based health care, the antithesis of institutional-based care. In this model, health care provision is farmed out to individuals whether they meet outside of the home to receive services, while they still remain able to live at home rather than in an institution. In most cases, this turns out to be a far less expensive alternative that usually provides superior care. This is accomplished through waivers granted by the federal government for programs designed to accomplish this purpose by the state.


Already the House chose to cut one particular request for one set of waiver slots (the New Opportunities Waiver) by funding only at the minimum required by a law passed last year. (The higher request level was in order to reduce the backlog of 12,000 or so.) Other slots that don’t have that legal protection could be cut by DHH. However, not only would this not be a cost-effective move, it also might land the state in trouble as it continues to satisfy its settlement in the Barthelemy case where the state agreed to speed up access to waiver programs.

This leaves nursing home payments, which is where the bulk if not all of the cuts need to be. As a whole, the industry has an incredible large reliance on government funds, among the nation’s highest overcapacity and per capita payments. In summation, the industry grew fat and happy with state policy that deliberate steered the disabled and elderly to such institutions – and the state money that went along with them. Savings of nearly $100 million a year were estimated by the Louisiana Legislative Auditor if the state adopted the typical standards of other states.

For years, warnings were sounded at every juncture about how this has to change, and the industry has fought tooth and nail to prevent it – even locking in the reimbursement standards into state law. The budget decisions made by the House provide as good an opportunity as any to start correcting this flaw in how taxpayers’ dollars get spent, Levine should note.