Panel award no excuse not to rethink Big Charity

-->

The Gov. Bobby Jindal Administration just about got what it wanted from a federal arbitration panel hearing concerning federal government reimbursements for the 2005 hurricane disasters. Now the question is whether it will spend the windfall wisely.

Yesterday the Civilian Board of Contract Appeals ruled basically in the state’s favor, awarding it $474.7 million to go to replacing the old Medical Center of Louisiana – New Orleans campus, primarily known as the “Big Charity” hospital complex for treatment of the indigent and for medical education. The federal government had argued for an amount less than a third of that, arguing that much of what was claimed as storm damage in reality was decrepitude allowed in by the state unwilling to pay properly for maintenance costs over the decades.

That the decision came fairly quickly indicates the three-person panel found the state’s argument pretty convincing. Legally the arbitrators could have taken up to a couple of months to make the decision, and even longer if they felt necessary. Thus, this likely is the final word that will come out without any judicial or legislative intervention.

Now the ball is in Jindal’s court to use the proceeds most effectively. At least $300 million was saved by the state not having to put up that much more, now to be paid by the federal government. However, the overall cost of the project will be at least twice the awarded amount, so the projected state commitment of more than a half-billion dollars must be reviewed carefully.

In 2008, the Administration released a study outlining its vision of what the new facility would look like. It revised downwards more ambitious assumptions made by predecessor Kathleen Blanco that better comported to reality in terms of costs, demands, and population served. However, over a year-and-a-half now has passed since its release and conditions have changed further which provide substantial reason for the key assumptions to be reviewed which, upon further reflection, very likely will argue for the state to go back and come up with an even less-grandiose facility.

They include:

• Demographic shifts. There is considerable dispute over just what the area’s population and its components will be which will determine the usage of the facility as the majority of its clients are predicted to be there on some kind of federal-government run insurance or reimbursement. Using even more conservative estimates, with room to grow would prove more cost-effective.
• DSH redefinition. The Disproportionate Share Hospital payments program was changed a year ago which means fewer revenues can be drawn by a charity hospital, meaning a reduction in the number of beds may be in order.
• National policy. One way or the other, national health policy seems driven to get the government out of direct reimbursement of health expenses, either by forcing higher costs onto the private sector and consumers or by empowering consumers with more choice and less government interference to improve efficiency. Either way, this means less business for a charity hospital.
• Other state priorities. Competition for state one-time dollars only has been increasing, with road needs drifting upwards into the $14 billion range, unfunded accrued liabilities in pensions now approaching $17 billion, and an unknown in cost but greater demand placed upon coastal restoration. Downsizing the present facility planned could save an extra couple of hundred million dollars to be used for these purposes that might prove more cost effective than for the facility.

Instead of breathing a sigh of relief and counting its dough, Louisiana needs to reevaluate where it is going with a rebuilt Big Charity, not only taking these above factors into account, but also keeping in mind how the purpose of the facility, which really primarily should be medical education and not care of the indigent, plays into the overall redesign of health care that Jindal has pursued in piecemeal fashion. An option that needs to be taken far more seriously than to date the Administration has is not to build an entirely new facility but instead to renovate the old. Jindal has stressed wise stewardship of funds as a hallmark of his term; he should not allow special interests or avoidance of critiquing his own previous work to prevent use of a rigorous application of that principle to recreation of a permanent state-owned hospital in New Orleans.

Save LA money by dropping unneeded lt. gov. office

As a number of folks rush to crown Lt. Gov. Mitch Landrieu the incoming mayor of New Orleans even without any election having taken place, Gov. Bobby Jindal has come up with an excellent idea on how to handle any future vacancies in the state’s number two job: don’t have any by abolishing it.

Predictably, some politicians expressed disapproval without really telling why, but the advantages of this would make a lot of sense. In order for this to take effect before the next round of elections, two-thirds of each chamber of the Legislature would have to agree to amend the Constitution and to schedule the popular election for this fall’s election date (concurrent with school board elections, among others), where it must gain majority approval.

Principally, this would save money. Frankly, the lieutenant governor has little to do now while pulling down over six figures in salary. Nominally, he heads the Department of Culture, Recreation, and Tourism, but there’s actually a real secretary to do those things. Eliminate the lieutenant governor’s job and the staff that goes along with that, and this year’s budget indicates over a million bucks a year could be saved. (In fact, Jindal appears to want to eliminate CRT as well and send its functions elsewhere which would make good sense as well since in some ways it’s duplicative; for example, both this department and the Department of State have responsibilities for museums.)

Not having someone sitting around waiting for the governor to vacate the office or become incapacitated (or in Louisiana, leave the state borders) is not unprecedented among other states. Seven do not have one and one is not popularly elected, and of the 43 only 25 have legislative responsibilities. Jindal’s proposal would be to have the Secretary of State succeed to the governorship in time of vacancy, currently the office in the state with the least amount of policy-making duties, which is done in Oregon and Wyoming, in addition to the commonwealth of Puerto Rico.

About the only justification to have the office is because it offers one more elective job for politicians and an increased chance to live off of taxpayers. That’s the only (bad) reason why legislators may balk at this if proposed by Jindal, since it will be one less outlet for a term-limited legislator to find refuge when being forced out of his current legislative office. This is in strong contrast to how governors probably see its value, where, as exists currently, someone of a different party can take shots at the governor while having little responsibility himself for policy-making and therefore having to deal with the consequences of his suggestions. But with Landrieu possibly out the door, the biggest obstacle lobbying against such a change (a sitting lieutenant governor) may become removed.

When Louisiana rid itself of its elections commissioner a few years ago, it went from being the state tied with the most separately elected executive officials (not including education). Moving further down the list is an idea whose time has come, and Jindal should pursue this with some vigor.

New B.R. indigent care policy needs expansion statewide

Gov. Bobby Jindal is making the right move, but now he needs to make the big move when it comes to realigning the way the state provides health care to the indigent.

The Jindal Administration made formal its commitment to discard the charity hospital model in Baton Rouge by making permanent the ongoing move of functions of the state’s Earl K. Long Medical Center to the private Our Lady of the Lake Regional Medical Center. By 2014 the state’s run-down facility would cease any provision, and all but prisoner care and obstetrics would be done by OLOL or from state-leased facilities from it. The state would pay for some of the new construction and operating costs.

This will save the state perhaps $400 million in costs to build a new facility due to the decrepit nature of the present facility. Still to be worked out is the disposition of some of EKL’s satellite clinics which to receive federal funding for treating Medicaid patients must be affiliated with a hospital and the treatment of prisoners and obstetrics, but surely the state can make arrangements with other providers for these. Besides OLOL essentially taking over treatment of the indigent, it will become the major source of medical education for the area.

Jindal can remain unscathed despite tough fiscal times

(From five years ago, I take it back.)

A recent news article asks how long Gov. Bobby Jindal can continue to enjoy high popularity given budgetary difficulties in the state. The answer is, unless he doesn’t pay attention to certain things, a very long time.

For the fact is, a mildly conservative public in the state approves of an agenda implemented by Jindal to this point that has been mildly conservative. Thus, the majority only may begin to question Jindal’s handling of potentially bad budget deficits if he begins to cut what are considered services of some importance which also are seen as presently well-managed which cumulatively begins to affect a substantial number of the citizenry.

So far, that’s not been the case with one possible exception. Because of constitutional limitations, with two exceptions cuts to date across the budget have been broad and not very deep. Since, and with good reason, Louisiana state government in general has been seen as bloated and unusually inefficient and the vast majority of the citizenry has seen cuts that heretofore have no real impact on their lives, there’s little reason for them to be upset with Jindal over these, especially if the alternative is raising taxes.

For one of the two areas that are forcibly disproportionately cut, those hitting higher education in sum bring little negativity to Jindal. Being a state of lower educational attainment and quality does tend to make the public as a whole less likely to want to support higher education, but more of this has to do with self-inflicted wounds by higher education itself. It insists on running an inefficient governance system that results in one of the highest number of institutions and highest per capita costs in the country while charging in the middle range of tuition. Until it can explain these inconvenient facts to a skeptical public or change them, Jindal will not be harmed politically by this issue.

In the other, health care provision, the vast majority of clients in this area typically are poorer and less educated and thus susceptible to the false promises of liberalism, to which Jindal does not subscribe. While some of this group may be adversely impacted by these significant cuts, in large part they already disapprove of Jindal for his insistence that people expect less out of government and society and do more for themselves. So, again, political damage can be limited here.

Yet this also is a partial exception, in that if cuts here aren’t smart and appear to cut off truly necessary services to the deserving, Jindal could be perceived as too mean-spirited. Therefore, in handling this area, the largest by far in absolute dollars removed, Jindal must appear to be making cuts fairly among different areas of client support that do not appear to risk lives and health.

This he can do, and so far has been doing, by emphasizing the cost-saving aspects of providing a similar level of service. For an example of this, there are recent moves to close state-run institutions in favor of decentralized, private sector group homes for the developmentally disabled where dollar figures demonstrate the captured saved money. However, this must continue; for example, while the Resource Allocation Model has been employed to match appropriate number of hours of home-based care to clients, it has not yet been deployed to nursing homes and until it is, Jindal can be accused of favoring private interests in that industry over patients.

Other recent developments can assist Jindal in maintaining voter popularity in tough times. The products of the Commission on Streamlining Government, now available, and of the Postsecondary Education Review Commission, soon to be available, Jindal can refer to for backup in pursuing these ideas in front of the Legislature, whose enactment of most of their suggestion will allow whatever might be controversial from them not to be pinned entirely on Jindal.

However, in reference to disproportionate cuts, Jindal cannot use the excuse that he is hamstrung by the law and Constitution. Last year, he proposed reviewing the nearly 400 dedicated funds and to change procedures dealing with a budget deficit position that would have induced greater flexibility into the system, but could not win the Legislature’s support. He must try again to show he does not want to live by this system, change of which will reduce the burden on health care and higher education and create better prioritization of state spending.

Take this course – without raising taxes – and Jindal largely will be immune from any ill-effects on his public support caused by fiscal difficulties. Indeed, should he manage to pull that off, he will gain far more accolades – and political capital for any future electoral ambitions – than had he and the state had the fortune of more pleasant budgetary times.

Tough love should cause ending the charity system

Often years ago, but not recently, I have written that Louisiana needed “tough love” from the federal government to do the right thing. That was commonly the case under the administration of Gov. Kathleen Blanco which put growing government ahead of empowering people, the correction driven by the presidency of George W Bush. This legacy continues, now under Gov. Bobby Jindal, derived from one of the last acts of the Bush Administration.

That was a new rule regarding the use of Disproportionate Share Hospital funds, which is the federal government’s way of reimbursing hospitals for providing Medicaid services as the clients typically the facilities little or nothing. Starting this July, it restricts the kinds of procedures for which reimbursement will qualify.

Louisiana will feel the impact of this change far worse than any other state in terms of health care financing because no state approaches it in the amount of Medicaid DSH funding that goes to government-owned institutions. The state has stubbornly stuck by its charity hospital system which, instead of decentralizing and privatizing it for efficiency sake, creates worse outcomes and higher costs. It’s predicted to be $137 million, but private providers also will suffer and will look to the state either to make up the difference or close their doors in some cases.

Landrieu can't talk her way out of big political damage

No amount of spin emanating from Democrat Sen. Mary Landrieu can change the fact that the victory by Republican Scott Brown in Massachusetts Senate special election is for her an unmitigated political disaster. The interesting part is in discovering just how stupid she is willing to appear in trying to avoid that.

Landrieu’s subsequent remarks about this betray any one or all of a heretofore-unimagined vapidity, an incredibly stone ear, or a super-sized blithering idiocy. Let’s start with her declaring that the victory by Brown, which deprives Democrats of a chance to be able to break Republican Senate filibusters to prevent a health care reform bill that would raise costs, premiums, and lower quality that Landrieu supported, was “a wake-up call to the wing of the Democratic Party that wants the federal government to overreach and overspend.”

By that statement, Landrieu suggests she is not part of that “wing” of her party. That being the case, if she doesn’t want “the federal government to overreach and overspend,” then why did she vote for a bill that precisely did these things? (And, in another self-negating act, for a spending bill that has done nothing positive for the economy?) Despite numerous constituent outcries in Louisiana against the bill for these reasons (that is, when she could be bothered to listen which appeared to be seldom) to alert her to this fact, she seemed to ignore the reality of what she now admits.

Absent Vitter blunder, Melancon Senate chances gone

You might write it off as a fluke owing to sample size, method, etc. or not compelling if one poll gives a candidate even a decent-sized lead 10 months from an election. But when two give a Louisiana candidate with the field essentially to himself for the Senate an average of a 19 point lead and an average of over half the electorate intending to vote/support him – especially an incumbent Republican – the race is over.

Republican Sen. David Vitter finds himself in this enviable position as a Rasmussen poll of likely voters by phone and a YouGov/Politmetrix Internet poll of likely voters put him solidly ahead of Democrat U.S. Rep. Charlie Melancon. This is the largest lead registered by one major-party candidate over another in almost two decades in the state, before Senate races started to field competitive Republicans. Also favoring Vitter is that it’s been eight decades since an incumbent lost in Louisiana and, in the competitive era, no Senate candidate with such a lead ever has lost.

Add to that the darkening red shade of Louisiana statewide electoral politics and it might be a long, lonely, and resource-poor interval for Melancon as he beats his head against this brick wall. It’s difficult to think of any normal scenario where Melancon could pull this out given these numbers and must be stoking up the heartburn among himself and his campaign staff.

For example, what if the election of Republican Scott Brown from Massachusetts to the Senate, flipping the seat, stops radical health care reform in its tracks? Without that shoved down an unwilling American people’s throats, that issue goes off the table and Melancon won’t have to deal with that toxicity? Not really, because Vitter will remind all he was right from the start while Melancon had to be dragged kicking and screaming to starting over.

Or if Obama suddenly came to his senses and began to try to govern from the center instead of the far left? No, Vitter gets the credit for opposition that he can legitimately claim pulled Obama in that direction, while Melancon becomes an enabler for votes such as for the spending bill that has done nothing positive to the economy and hiked debt up to previously-unimaginable levels.

(As a side note, with Secretary of State Jay Dardenne announcing that he won’t contest Vitter for the GOP nomination, that would indicate Dardenne may be seriously contemplating getting into the lieutenant governor’s chair if, as he is predicted to do, current holder Mitch Landrieu wins the New Orleans mayoralty. His odds would have been better than Melancon’s but still long and the expense huge, so this comes as no real surprise regardless of whether a vacancy will come soon.)

As always, a lot can happen in a little under 300 days. But the facts are if anybody is going to come back from 20-point deficits in 2010 elections, it’s not going to be a Democrat. Numbers and history show that, unless Vitter is crazy enough to commit another “serious sin,” what once was considered a possible Democrat pickup opportunity has vanished.

Some in LA higher education their own worst enemies

Often in this state, elements of higher education become its own worst enemy, indicated by a tantrum thrown concerning the adverse impact of budget cuts on Louisiana’s colleges and universities that will only turn off the public even more about their plight.

Last month, the Gov. Bobby Jindal Administration was handed the unpleasant news that before the end of this month constitutionally it would have to axe $248 million from current year spending. Because of the fiscal structure of the state’s spending of its own revenues, the largest absolute hit happens to health care, but the largest proportional hit goes to higher education. Added to previous reductions for the same reason, higher education has now gone from a $1.4 billion budget a couple of years ago to about $1.15 billion.

It would have been worse without the federal spending bill passed last year, and part of that law which allowed money to be used for higher education also has a provision that says support levels for higher education can’t go below 2006 levels. Projected cuts of $84 million this time would put the state $60 million below, thus to proceed a waiver from the federal government – already successfully obtained by two other states – must be granted.

Case shows desirability of LA retirement policy change

Louisiana House Speaker Jim Tucker got resolved that the Legislature should look at changing Louisiana’s retirement system from a defined benefit to a defined contribution plan. The experience of former Jefferson parish President Aaron Broussard shows why this is a wise move.

Until 1990, most state employees and many parochial and municipal employees on hiring were enrolled in a defined benefit retirement plan which means they receive a set annuity (adjusted optionally legislatively for cost-of-living increases) monthly. It is computed typically at one of 2.5, 3 or (for elected state officials) 4 percent of base salary times number of years served. Base salary is determined by an employee’s retirement eligibility (usually 30 years in or after age 55) date for the three following years if an employee requests to declare participation in the Deferred Retirement Option Program. During that time, money that would be paid upon retirement is banked and then becomes available shortly after retirement. If the 36 months passes and an employee continues to work, the money earns interest until it can be withdrawn.

Broussard, who resigned under pressure, has almost-immediate access to $185,000 (although for tax reasons he may wish to do otherwise) because of his DROP participation. Further, he will draw a pension of about $90,000 annually, or about 72 percent of his last salary. If he has any, also available is compensation for any sick/leave days which can be substantial.

By contrast, a defined contribution plan essentially takes tax-free a part of an employee’s pay (currently 8 percent) and a state match (currently 7 percent) and puts them into what is essentially an individual retirement account. Upon retiring, depending upon age, a lump sum and/or annuity payments could be taken. Unlike the defined benefit plan, there is no disability or survivor’s benefit after five years of service.

Just by using this example, the state can save in at least three ways and promote more efficiency. First, the state doesn’t have to pony up money three years before retirement which looses interest income for it. Second, by not allowing employees to leave potentially in the 50’s and paying them essentially full salary, experienced employees are encouraged to work longer instead of becoming double-dippers by taking another job after state retirement. Third, the state won’t be on the hook for extras like disability pay, survivor’s benefits, and the like which should be the responsibility of individuals to arrange.

Thus, while it is impossible to say with certain actuarially, it is likely that the state would save money this way. Even if those costs ended up the same, it would bring more order to the process (no more predicting about who retires and dies when, just known amounts going into plans every month) and keep the state from having to front money early by DROP. Note also perverse incentives for early retirement would be reduced, and the state would save money by eventually not having to a pension-management apparatus.

The matter’s urgency intensifies because of the huge deficit the defined benefit plan has triggered in the state. It’s now estimated that the unfunded accrued liability on accounts – which constitutionally must be solvent by 2029 – is almost $17 billion which creates a massive debt to be financed. While a switch in strategy won’t reduce this, it will prevent it from becoming larger through new obligations.

Committees have mused about ending the current system by the start of the next fiscal year Jul. 1. A defined contribution plan won’t deprive future employees of a generous retirement if they behave reasonably, and will save taxpayer resources. The example of Broussard’s case should sensitize politicians and the public to the wisdom of making the change.

Legislators complain about wrong disabled policy

Some Louisiana legislators expressed perturbation over the state’s Department of Health and Hospitals abruptness in moving to privatize group homes the state has maintained for the developmentally disabled. More appropriately this emotion would be levied at themselves over their lack of alacrity dealing with the disposition of past privatization fruits concerning this clientele.

Members of the Joint Legislative Committee on the Budget complained that they and the relatives of individuals living in these homes, which are geared to serve moderately mentally and physically disabled individuals, received next to no warning of the decision before it was announced that the facilities were not going to be closed immediately and that over the next few months they would be privatized or, failing that, their residents dispersed to other homes. The move by the state came as a result of necessary mid-year budget cuts and similar previous utilizations showed that costs per client are significantly lower with comparable or better care in private facilities.

But it must be acknowledged even as legislators pontificate about how forcibly quick decisions of this nature – which aren’t that hasty in that closing such facilities has been a long-term goal of the Gov. Bobby Jindal Administration and before – threaten outcomes that provide for maximal care and peace of mind for client’s relatives, that in the minds of many of them there is another reason for their pique: as with any state-run operation, these homes are seen as devices by which to win votes locally. Being able to campaign with taking credit for providing this service, as well as the state jobs attached to it, is off the table when the state no longer directly provides the service or jobs. Legislators do not like it when executive branch officials take away their ability to be perceived as doling service and employment opportunities, so this was part of their angst although none will admit that.

Yet ironically, in the larger question of the state getting out of the business of direct provision of living spaces for the developmentally disabled, it is legislators themselves who are not addressing about the right thing nor making efforts to see that it is done. As the state has reduced its role, it has been slow to implement the cost savings from the growing privatization campaign which delays possible benefits going to that client population.

In recent years, beginning before Jindal assumed office, the state has had a strategy to shed itself of some of the supports and services centers for the most severely disabled and downsizing others to group homes. The strategy was to close and sell the facilities and, according to Act 555 of 2006, to use proceeds to fund more Medicaid waiver slots that would permit home- and community-based care. However, this has occurred at a snail’s pace where the state still has the facilities (one is no longer residential and four have been turned into glorified group homes) with costs still being even higher by keeping them operating with far fewer clients so that no proceeds have been forthcoming to fulfill that new law. This statute also would apply to the closing of these group homes.

Legislators should not be so concerned about facilities getting closed as they should be getting the proceeds from their sale into reducing the tremendous backlog in the waiver program that will only grow as de-institutionalization becomes recognized as an option for some clients displaced through the closings. Further, the cost savings (such as maintenance) from taking these properties off the state’s hands can go to addressing the budgetary crisis in the state’s Medicaid system because the state’s fiscal structure forces so many reductions on it. They need to pay more attention to their oversight duties on this account, and not so much sniping over decisions made for efficiency and effectiveness sakes.