Political courage can mitigate LA health funding crisis

If you think the budget difficulties for Louisiana were bad for this current fiscal year, unless federal largesse becomes unexpectedly generous in an era of enormous federal budget deficits, you haven’t seen anything yet in the area of state health care expenditures.

For the upcoming year, as Health and Hospitals Secretary Alan Levine told the Senate Finance Committee, three monetary problems, two of a recurring funding nature, loom for the state. (This does include likely mid-year budget cuts, either.) First, the state’s proportion of expenses paid for Medicaid is scheduled to rise to 37 percent from 20, costing an estimated $992 million extra next year. Second, what the federal government will reimburse to the state for procedures done for many of the indigent (because since the state runs a charity hospital system, it spends the money directly for care where in other states a non-governmental entity would be doing it) will be reduced, costing an estimated $200 million extra next year. Third, because of past erroneous practices the state owes $800 million to the federal government for reimbursements it should not have gotten, although this money has been set aside for payment.

In each instance, the state is trying to get around the necessity of absorbing these costs. For the first, it is arguing that the rise in its share of payment is an artifact of the hurricane recovery-inflated economy and not genuine, meaning it should stay at the 20 percent level. For the second, it wants this new rule to be waived, as most new rules regarding care reimbursement have been. For the third, it wants the federal government to waive the amount owed if it is then applied to a revamp of the indigent care system in the state along the lines suggested by Congressional Republicans in regards to the national health care policy debate.

Whether even some of this relief will come is open to debate. The Democrat-run national government is catching enormous heat for its beyond record-busting deficit spending, and as it continues to lose the national health care debate it may be loath to allow Republicans’ ideas to demonstrate their superiority in a trial run in Louisiana. Therefore, Louisiana should not count on total relief in all of these areas.

Some self-help can be the key. If Louisiana shows it will deal with some of these costs itself, maybe this will cajole the federal government into providing some relief. Levine has mentioned eliminating the Medicaid pharmacy program (little to no cost drug prescriptions that many can purchase participation in) and rolling back reimbursement rates to 2007 levels, which he apparently believes won’t chase too many providers out of the system, could save as much as $350 million a year. He also is looking at privatization of mental health service provision. Still, all together these moves would save maybe 30 percent of the annual projected increased cost.

To make its case stronger, several other things could be done. One of the biggest areas of expenditures is nursing home reimbursements (about 85 percent of their delivered care is Medicaid-compensated by the state) which have a privileged position for political reasons. The Legislative Auditor has estimated that nearly $100 million a year could be saved simply by making Louisiana homes follow the rules the majority of other states follow, and also the favorable law that compensates them for empty beds because they counted on continued state generosity that led to overexpansion costs transfers an estimated $20 million a year of taxpayer funds into their pockets for no good reason. These two changes would require changing the present case mix methodology stupidly put into law in 2006.

Also, the resource alloacation model currently being applied to better align spending on the developmentally disabled in home- and community-based situations needs to be applied to nursing homes, which presently are exempt from it. This likely would allow many who are in homes to be moved into their own homes, their families, or community settings at a far cheaper cost to the taxpayer. Finally, the state can exit for the most part running its own developmental centers and nursing homes, closing most as their per patient costs are much higher. Together, these tactics would save tens of millions of dollars a year, perhaps into the hundreds.

Perhaps these changes could rack up at least a couple of hundred million more in savings. Combined with the other changes, maybe the state could argue for it can pick up a lot of the increased reimbursement, in exchange for the federal government taking care of the rest and waiving the new rule. Further, it would demonstrate that Louisiana can reform itself so it should be given a shot for even more changes through waiving the penalty. But all of this takes political will by the executive branch and particularly by the Legislature. Unfortunately, the courage to do so is found in small quantities among legislators who typically are unwilling to buck special interests or to scale back state operations in their zeal to show they are doing “something” and claim they provide (state) jobs.

Levine has shown he will do what’s necessary within the possible parameters of his office to deal with this unpalatable situation. Whether politicians will follow with the policy changes required is another matter and may make all the difference as to whether Louisiana comes out of this looming disaster in acceptable shape or in crisis.