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17.6.09

Transfer bill defeated by desire for pork, love of big govt

The defeat of HB 783 represents everything that is wrong with the state of Louisiana – continued infatuation with big government, putting government employees ahead of the taxpayer, and good-old-boy politics of spreading out goodies for reelection – with a dash of ideological extremism thrown in for good measure.

This bill by state Rep. Rick Nowlin would allow the state’s Department of Health and Hospitals to sell and to get out of the nursing home operating business through the John Hainkel facility in uptown New Orleans. Not only does the state have to pay for running the facility, it ends up paying for its Medicaid patients an extra $72 a day over the New Orleans reimbursement rate. However, because of the mix of patients (veterans paid by the federal government, and private pay) typically it has been making an annual “profit” although it cannot keep those funds and must return them to the state.

The facility, among nursing homes, performs at the highest rating level. Note, however, that this is very relative. In the past inspection periods it had a significant number of violations and does poorly on a number of patient outcome measures. Nevertheless, because the majority of nursing homes do even more poorly, its relative ranking appears high.

Department of Health and Hospitals Secretary Alan Levine wants to privatize the facility with a lease arrangement in order to save the $72 per day per patient. This would result, after the first-year startup costs, at its current 85 percent Medicaid census count (typical for Louisiana nursing homes) at a 70 percent occupancy rate (again, typical in the state) and subtracting out payments for insurance and pensions would save the state around $386,000 a year. The amount could be significantly higher because lease payments were not included in the fiscal note. By contrast, the “profit” over the past few years averaged about $140,000 more, although the varied considerably. In other words, looking only at direct costs, the matter probably would be a wash in the short run but over the long run, as pension costs decrease, and especially if more Medicaid patients end up at the facility, “savings” would mount.

However, the indirect savings realized by the state could be much larger. This is because there are too many beds in nursing homes presently in the state, for which the state pays about $20 million a year. In other words, by contributing to the overbedding situation (and clearly Hainkel does so as its occupancy rate is not close to 100 percent) with its operation of Hainkel, Louisiana taxpayers are paying more than twice for some residents – the regular rate plus $72, and then again because a bed occupied at Hainkel is a bed left empty elsewhere. To put it another way, if the state is paying for 85 residents there who could be filling an empty bed elsewhere, the state additionally would be saving (at the lower reimbursement rate for empty beds) hundreds of thousands of dollars a year.

Which probably is why it’s desirable that if Hainkel could not draw a lease sufficient to pay taxpayers what its worth not to have the state to operate it, taxpayers would be best off by closing it. In the long run, so would residents of there and nursing homes statewide as the state could put the money saved from it and not having to pay for empty beds back into the system, encouraging other operators to provide more and better care statewide.

So a comprehensive review of the financial picture shows the deal is good for taxpayers and patients. In fact, the only people which it might not be are the 137 current employees at the facility that would have to reapply for their jobs under a lease arrangement (although 11 could retire) and the Luddite that represents the district in which the facility is located, Rep. Neil Abramson. He waged a virtual one-man war against the bill, and thereby taxpayers, using a couple of idiotic arguments:


  • That it was a good facility, so don’t alter it. So what? Why is there any reason to think that the state directly running it would have to do a better job than if it were leased to a private (probably nonprofit) operator? In fact, from what we know about human behavior, it almost certainly would improve without government intervention (note: there still would be plenty of government involvement in the enterprise with 85 percent of its patients being paid for by government).
  • That is made a “profit.” As the above analysis shows, relative to leasing even looking only at direct costs at best it is debatable that leasing would not be more “profitable,” and looking at the long run and all costs continued operation by government most certainly would cost more to the taxpayer.

    Note the particularly insipid assumption behind them: if government is so good at running nursing homes, why isn’t Abramson out there stumping to make government run them all? (To argue “it depends” contingent of a specific facility simply is logically inconsistent: the root conditions that differ between government and non-government ownership do not vary from place to place but remain constants.) The invalidation of these arguments means either Abramson is ill-informed or can’t think very logically, or he knows them perfectly well and uses them to hide his real motivations for opposition.

    One obvious motive for his opposing the bill was patronage. He can use the presence of the facility as tool to get reelected, and no doubt the interests behind the present operation of the facility will reward him handsomely in quiet, maybe public, assistance to his next campaign. It’s the 21st century, but good-old-boy politics are alive and well in his 98th House district.

    The other Abramson – on behalf of himself and others – tipped off in comments he has made about the idea. He has claimed there is some sort of crusade for privatization, that “it’s a policy-driven decision to get them out of the health care business and turn it over to private interests,” as if this time-tested philosophy were somehow a kind of black mark. This is because to Abramson and these folks, the last thing they want to do is to make government smaller. This is why they have bitterly opposed a reasonable budget that does exactly that and championed taking more money from the people. And even though this is just a small piece of government, to these relics blindly devoted to government as a means of control and redistribution of power and wealth it was one tiny battle they wanted to win against the many losses that ideology has taken this session in the Legislature.

    On this matter, for now they have succeeded, for as even though a majority voted for the bill, too many absences meant it fell four short to pass with a majority of the seated House. In fact, it could not have failed without votes against by several Orleans-area supporters of the budget and whom often (at least in rhetoric) support the idea of smaller government. Sadly, they succumbed to helping out Abramson bring home the bacon because some of those facility jobs could be held by residents of their districts.

    To further hamstring Levine, Abramson has proposed a study resolution on the question that if passed will make it more difficult politically for Levine to simply shut down the facility to save money during this next year. Regardless of the fate of this instrument, at present on this issue the politics of selfishness and the past have won out.
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