A recent meeting of a legislative panel to review potential belt-tightening in state government, focusing on health care spending, skimmed the surface of how spending priorities need to change to reduce an area that spends nearly after of the state’s budget.
The House Appropriations Committee heard from the Department of Health on its progress identifying areas of reductions. Republican Gov. Jeff Landry asked state agencies to develop plans for an anticipated budget cut from this fiscal year to next, spurred by the expiration of two temporary taxes, by November.
The figure LDH came up with at the state level was $105 million, which, given the menu of choices for cuts, involved $332 million of federal dollars. Much Medicaid spending is compulsory, so only $821 million of state spending can be considered. Of that, around $400 million is for Medicaid expansion.
Which is the most obvious and logical area to cut, basically solving the problem and then some. Unfortunately, it also carries a high degree of political difficulty by separating hundreds of thousands of people from a government freebie, even if many could afford it on their own and the state’s health indicators are no better for it since it runs so inefficiently. It’s a major reason why Louisiana ranks fifth per capita in Medicaid spending (2020 data) yet has about the worst health indicators of any state.
Assuming that is off the table, one programmatic reduction mentioned at the hearing hints at another major policy change that could go a long way to finding savings. LDH suggested the state could do away with the nursing home inflationary adjustment, saving $21 million. It should do much more than that by rebalancing long-term care spending not to send so many people to nursing homes and away from home- and community-based services.
Louisiana has been a long-time offender, wasting huge sums of money in the process, of an unhealthy imbalance towards institutions for long-term care of Medicaid clients. It ranks third-last among the states in percentage of dollars to HCBS at only 35.1 percent, with nursing homes lapping up the rest to make for the 11th-highest per capita spending on institutions. HCBS for almost all clients is cheaper and the latest data nationally shows about 60 percent of all long-term care spending is for it.
A number of states have transitioned to managed long-term care that promotes HCBS in a search for the least expensive appropriate care. That has been discussed in Louisiana for well over a decade with a number of bills to do so defeated in that span. Years ago, annual savings for that were estimated around $130 million. And there are other things that could be done, such as have Medicaid recipients pay fully their allowed co-payments and lower free care eligibility level at public-private partnership hospitals from twice the poverty line to 138 percent (as that interval qualifies for premium subsidies under federal law). Together, these would save in the $150 million neighborhood.
But, once again, pursuing these commonsense solutions would face political pressure to scuttle these. The nursing home lobby wanting to prevent the end of its gravy train would be joined by leftists complaining about lower income households taking responsibility for their own health care by paying their fair share instead of getting a free ride.
And then there’s the fact that for many years now LDH keeps coming in under budget; at the hearing, GOP state Rep. Tony Bacala, using the latest accounting, put the figure at $75 million for last year, fiscal year 2024. Bacala also pointed out that LDH received a roughly 20 percent boost for fiscal year 2025, over $500 million more, which he said was a consequence of past year overestimations.
The reason for this actually is self-reinforcing, and was reflected in another suggested cut. LDH said one option would reduce reimbursement to agencies for rates paid out to caregivers to the tune of $15 million. Yet a major reason why surpluses keep happening is because in the big-ticket HCBS programs, such as the New Opportunities Waiver, agency rates are kept so low that the wages they offer attract few nurses or other personnel. Clients with programs of care calling for a certain number of hours have filled far fewer than their maximums, so LDH never has to pay out that portion and pockets all that money.
The solution is to transfer money going to nursing homes to agencies, dramatically increasing their rates to make for competitive salaries for nurses and others. This not only would fill in gaps for existing clients but also take care of the increased influx of clients managed care would bring. Of course, nursing homes would have to reduce staffs handling fewer patients meaning fewer dollars to them, explaining why they treat this idea in legislative corridors akin to a death match.
Still, what was presented at the committee from LDH turned on the existing health care regime over which they, and Landry as their boss, don’t have a lot of control. Rule-making to mandate maximum co-payments, for example, could come from Landry’s LDH. But most changes would have to occur in statute, and most legislators sadly have little knowledge of what really goes on (even chairmen of committees overseeing LDH) and have feet of clay when it comes to resisting special interests who monetarily or ideologically benefit from the current inefficient system.
Cuts may have to come, but the inefficiencies are there to solve for most if not all of any gap. All it takes is an eye on clients and taxpayers, not special interests, to bridge it.
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