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LA faces no-win care scenario unless it rejects favoritism

As Louisiana approaches a precipice looming above a pit of budgetary deficit, it needs to take care that it does not miss a big opportunity to prevent itself from falling off it, in the matter of long-term care for the elderly and disabled.

This year, as part of cost control measures, the state began instituting a resource allocation model to better match needs and services in its home- and community-care settings. These waiver programs permit those with physical infirmities due to age and/or disability with limited means (in the case of the disabled, financial hardship often caused because of the high costs imposed by living with that disability) to live at home or in a community setting by the state paying for direct service workers to perform certain tasks ranging from the simple to very complex. Not only does this improve the quality of life for many, it is designed to save the state money.

The alternative is to be sent to a nursing home, either private or the few state-operated centers. For many of the elderly with recurring medical problems, this can be the best and most cost efficient solution for the state, which pays a certain daily rate as opposed to the hourly rate under the waiver program. (However, it would not be the best for the most severely disabled, whose medical needs often are exceptionally tailored to individual needs and require personal attention that very few nursing homes are specifically equipped to provide, and even then at a cost several times the typical reimbursement rate.)

This regime the state to some extent was dragged into kicking and screaming. Almost a decade ago, the state settled a court case known as the Barthelemy decision in which it admitted efforts to provide alternatives to shoveling every client into a nursing home were discriminatory and that it would substantially expand home- and community-based programs to address the needs of those for which that was appropriate – today’s waiver programs which allow the spending of federal Medicaid dollars on these as a “waiver” from the usual reimbursement protocol.

Barthelemy is set to expire at the end of this year but a new problem has arisen as a consequence of two mistakes by Louisiana in this policy area. One was a fairly indiscriminate method of qualifying and placing people into the waiver programs that didn’t do much to distinguish by genuine need, creating situations where some were getting more hours of coverage than they really needed and some that probably did not even need them, while some may not have gotten as many hours as they truly deserved. Errors probably were made on the more generous side.

As a result, costs have escalated making the average cost of the waiver programs as much if not more than those in the nursing homes. This runs afoul of a federal directive that states waiver program costs per individual cannot exceed those of reimbursements. As long as this situation continues, it makes it difficult to expand the program to cover the tens of thousands of individuals judged qualified for them but who don’t receive services while forced onto a waiting list for the limited slots. The resource allocation model aims to rectify that situation.

But the other mistake compounds this problem. The appropriate thing for the state to have done after entering into the Barthelemy consent was to have diverted money from nursing home payments, which would become less-utilized. Instead, due to the political clout of the industry it did no such thing and instead enshrined into law policies that not only created more generous policies than in most states, but also entered into practices (because of the oversupply of nursing home beds) that effectively subsidize private operators $20 million a year for unused beds. In fact, as vacancies hover at the 25 percent level, nonsensically that industry got more money in the latest state budget while the waiver programs were cut.

Besides changing reimbursement policies and wiping out the empty bed subsidy, the logical thing to do would be to apply the resource allocation model to nursing homes as well. No doubt there are many – in fact some eager – patients in them who could be served more cheaply in a home or community setting that the model could identify. In addition, by moving these people out the average cost of the waiver programs would go down, enabling more slots to be opened up. However, the clout of the industry has prevented this from happening precisely to keep subsidizing it with taxpayer dollars because the shift would cause its average patient cost to go up and therefore this money would be diverted into the waiver programs.

If this does not happen and the outcome is clients who reasonably could be expected to live in a home or community setting are forced into institutions, the state sets itself up for another lawsuit it cannot win. So the solution is logically simple yet politically difficult: apply the resourced allocation model to nursing homes and junk the case mix methodology that unusually favors them (as well as dramatically reduce the state’s direct provision of nursing home beds as an unrelated but welcome way to further reduce overall expenses). Only in this way can Louisiana bring down average costs and avoid a lawsuit that will force the state to do it.

Yes, nursing homes, who derive in the neighborhood of 85 percent of their revenues from government, will suffer. But that’s because they made bad bets assuming government would subsidize them at the current generous rate forever. Their profits will go down, they may lose money for awhile, and facilities may close (although demographics in the future are on their side), but that’s because of the decisions they made and it is illegitimate to expect taxpayers to fund their errors as the state scrambles to ensure there is not budget Armageddon in a couple of years.

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