More than ever, LA must align resources to health needs

Part of the belt-tightening of Louisiana government in response to revenue decreases coupled with a semi-inflexible fiscal structure involves cutting reimbursement rates to medical providers by seven percent. This blow can be made easier by reconfiguring state priorities and potentially increasing service delivery with reduced costs.

The typical person probably did not shed too many tears when these rate reductions clipped revenues going to the likes of physicians and nursing homes. In the case of the former, it’s easy to fall back onto the stereotype (sometimes true, sometimes not) that they can afford a reduction in rates (which, to some degree, can get passed along to the private sector and its insurers), and the same is true of nursing homes in Louisiana, where policy for decades has favored over-capacity that puts some people better served at home or in the community into this more-expensive situation (which also can do some cost shifting to help compensate these reductions).

But another segment suffering these cuts has little buffer against them. Direct care agencies are the mainstay of health care waiver programs that focus on community- and home-based care that often is more appropriate to the needs of the infirm or developmentally disabled at reduced cost to the state. Typically, they hire low-wage individuals to perform basic care tasks (although in some situations these tasks in fact can involve some skills beyond basics), and currently as the state expands its provision of these services, in part because of the low wage rates, these providers are having difficulty in finding enough quality employees to meet the demand. And in response to the cuts, with their workers’ salaries at or near minimum wage, they cannot reduce these to save money and with salaries the vast bulk of their expenses, there’s little room to carve out savings in other expenses which these other providers can do, nor can costs be shifted to the private sector since in most cases close to all if not the entirety of these agencies’ business are government contracts.

If the cut proves too great in impact, fewer clients will gain access to a waiver program simply because of too little capacity. This not only is a tragedy for those genuinely needing service and for taxpayers that continue to bear the brunt of the institutional bias in state policy, but after a certain point also is not an option because of legal settlements the state has entered into. However, a solution is at hand – one that will not please certain interests, but one necessitated by budget constraints and the dicta that both clients and taxpayers be most appropriately served.

Last year, for one waiver program, the state began a novel intake system where severity of need got first priority. This philosophy may be extended in terms of reimbursement. Regulations may be changed so that a client authorized through Medicaid is designated having a certain level of care required, mandating placement in the lowest possible arena of care. This would mean, for example, for clients without a high degree of medical necessity in care Medicaid would reimburse only in a home- or community-based setting. This would more appropriately align resources to need and in a limited fashion already is being discussed in reference to state-run nursing homes. The real advantage of all this is as taxpayer dollars get more efficiently used, even as a greater proportion of them would go to lower-intensity care solutions, that efficiency would create more of them to raise reimbursement rates for all providers which especially would relieve the worker shortage endemic in direct care agencies. It also probably could expand coverage for those on waiver waiting lists.

Of course, this could lead to much wailing and gnashing of teeth for institutional interests which would see fewer beds utilized and thereby less revenue, even as their rates increased. Even though they actually might be better off in an operating income sense because their variable expenses may go down more than the revenue decrease, some, believing the state gravy train would go on forever, overbuilt and would have to pay off increased excess capacity.

Regardless, policy-makers should resist the entreaties of these powerful interests to maintain what exists because what exists unnecessarily threatens both health care provision and other state services that are beggared by this inefficient use of the people’s resources. In these tough budget times, political courage to make these changes no longer should be optional.