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Nursing home gravy train imperils LA health care spending

Last week a day of testimony in front of the Louisiana Legislature’s House Appropriations Committee concerning the budget was dominated by how the state’s revenue woes would impact deeply individual-based community services. It came on the heels of a discussion a week prior that got the attention of inattentive legislators which might finally get them to understand the single best solution to these budgetary problems.

As previously noted, the necessity of budget cuts is endangering the state’s judicial mandate to move the elderly and disabled into the most appropriate, least costly means of care for those qualifying through Medicaid, because the cuts could reduce the ability of agencies contracted by the state to hire enough employees to provide enough hours to cover those designated for service reception. Since there is an overall revenue problem, to prevent this from happening, revenues must be shifted from elsewhere.

Fortunately, that other source exists – nursing homes, with the revelation in testimony in the middle of April that an average of 8,500 beds were empty annually costing $20 million to the state. This seemed to shock committee members, but for those who had any legislative service prior to this term it shouldn’t have been – they approved of this matter tacitly for nearly 20 years and did so legislatively in 2006. That was when both chambers unanimously approved what would become Act 848, putting into law an administrative formula setting up state payments for empty beds for an industry already with overcapacity. The industry had argued it needed this to stabilize revenues to homes and increase their creditworthiness. Presumably, this would encourage owners to make upgrades to their facilities. However, a substantial component of the reimbursement formula funded capital improvements, so the additional incentive should not have been necessary. Since then, overcapacity has continued to increase.

So one step would be to repeal this and shift funds to mitigate cuts to non-institutional entities, but it would have to be accompanied by another. Presently, and fairly sensibly, the state has gone to the use of a Resource Allocation Model that determines the appropriate level of care for each qualifying individual. The problem is it is being used discriminatorily as it is not applied to Medicaid recipients in nursing homes. If it were, a significant portion of those residents might be found not to need this most intensive form of care and, depending on their circumstances, could go into home- or community-based care. This is something that will be fought tooth and nail by the nursing home industry, because it could erode their revenues further as they are penalized in reimbursements for not having at least 70 percent capacity.

A third component to change would be, as previously recommended, closing of at least some of the state developmental centers given many residents probably could live in the community. These shifts from institutions are becoming increasing possible as the average waiver expense is now trending well below the average reimbursement of about $45,000 annually the state pays for a (shared room) Medicaid bed or $127,000 at a developmental center.

But this three-pronged strategy may have to happen soon. The settlement of Barthelemy v. Hood which triggered the state’s spending almost nothing a decade ago on waiver programs to now over a quarter billion dollars a year will expire at the end of this year, eliminating a legal tool to push the state out of its institutional bias that created the problem in the first place (which caused nursing home overbuilding because state regulations created such a gravy train for them). Tens of millions of dollars would be shifted from nursing homes annually under these reforms (who get about 80 percent of their revenues from state government) so the industry may hope to try to fight a delaying action to get to 2010 when less pressure will be on them to surrender their inefficient use of taxpayer resources.

Nursing home interests long have been powerful in the state (it’s perhaps no accident that the lead author of the 2006 law, state Sen. Sherri Smith Cheek, got nearly a third of her campaign funds from the health care industry for her 2003 contest) but what finally may win the day is the severe budget crisis. The Gov. Bobby Jindal Administration, for all its talk about indigent health care reform, has very incompletely addressed the fiscal reforms in terms of state reimbursements. While cutting reimbursements at the margins for nursing homes (such as not continuing to policy of paying homes for beds empty on a short-term basis because of hospitalization), it has shown no willingness to stump to alter the case-mix formula put into law nor shift funds from nursing homes to direct care agencies such as by comprehensive use of the RAM, and proposes actual increases of funding to the developmental centers.

The greatest budgetary savings in the tough financial situation would come from doing these things, with care not suffering and likely improving for those shifted as a result into an environment more conducive (and probably less expensive to taxpayers). It just takes the political will do so, and hopefully this crisis finally will prompt this long overdue behavior.

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