HIGHLIGHTS

  • Lawmakers have throughout the years passed laws that safeguard nursing homes, though they're less preferred and more expensive than home care
  • Nursing homes cost the state $47,331 per resident per year, compared to home- and community-based services which cost between $13,758 and $33,117
  • Former Department of Health Secretary says nursing home lobbying motivated by industry greed
  • No action by politicians on health care reform that would decrease dependency on nursing homes and could save state $200 million a year
  • NOTE: This is the final installment in a three-part series that explores the political influence and quality of Louisiana nursing homes and the resulting impact on Louisiana's most vulnerable population

Year after year, Louisiana lawmakers gather in Baton Rouge and grouse about the unpalatable choices they face: Cut state services, raise taxes or do some of both.

Yet neither the Legislature nor the executive branch of government has lifted a finger to pursue a reform that experts estimate could generate more than $200 million annually — a sum that would put a healthy dent in Louisiana’s annual financial woes.

Better yet, the people affected — some of the state’s most vulnerable residents — would welcome the change as an improvement.

As things stand now, elderly and disabled Louisiana residents who can't afford private care are much more likely to end up in a nursing home than to receive less expensive aid that would allow them to stay in their own homes.

The status quo runs directly counter to public demand: Waitlists and public-opinion surveys show a huge majority of elderly people would prefer to remain at home.

State officials have periodically shown an interest in moving the needle in that direction, such as when Gov. Bobby Jindal’s administration spent two years on a complex effort to overhaul long-term care in Louisiana.

At that time, estimates projected the move would save $77 million a year, but Jindal, amid an unsuccessful run for president, scrapped the effort in 2015 just before bids were to be sought.

Since then, the projected savings from such a reform have only grown.

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But instead of trying to slow the flow of people into nursing homes, legislators have instead opted time and again for rules that safeguard the homes’ owners. They’ve passed laws, for instance, that require the state to increase biannually the daily rates they pay nursing homes — and make those rates nearly impossible to cut.

The special protections eat up an ever-increasing share of the money that could otherwise be funneled into home- and community-based care, a cheaper alternative to institutionalization that allows people to live at home with help from personal assistants and nurses.

"The biggest reason that these laws are enacted is because they're done directly at the request of the nursing home industry," said Hugh Eley, the former deputy secretary of the state Department of Health, who retired in 2015 after a 20-year career. "That's a good example of how public-policy decisions that are being made are not necessarily the best thing for the taxpayer, but they benefit the industry."

Nursing homes now get 77 cents of every Medicaid dollar Louisiana spends on care for the elderly and physically disabled, while home- and community-based programs get the rest. This doesn't include funding for the developmentally disabled. That ratio, among the highest in the country, has been increasing steadily since 2013.

Kathy Kliebert, a 25-year veteran of the health department who served as its secretary from 2013 to 2015, sees nursing home operators as the most effective lobbyists in the state Capitol — as measured by getting their way.

"The other (health care industries) didn't have the large profit margins that nursing homes had, so they weren't so motivated by greed," Kliebert said. "(Nursing home leaders) spent their time and efforts lobbying the Legislature and giving money to the Legislature and others in political power to make sure they didn't have to change."

The result is expensive for taxpayers. On average, a nursing home costs the state $47,331 per resident per year. By comparison, it costs the state between $13,758 a year and $33,117 a year to care for an elderly or disabled person at home, depending on the level of care they require.

Mark Berger, executive director of the Louisiana Nursing Home Association, points out that part of the annual cost for nursing homes is covered by their own provider fee, which is first paid to the state and then redirected back to them. But even with the provider fee, community-based services are still less expensive to the state.

Berger also said most people in nursing homes aren't suitable candidates for home- or community-based services. Most nursing home residents are dependent on around-the-clock care, he said, while home-based services only help people for a few hours a day.

On the other hand, studies show that Louisiana's nursing home population trends younger and less dependent than most of the nation, suggesting many don't require institutionalization.

Jeff Reynolds, undersecretary of the state Department of Health, believes the state should expand home-based offerings, but he says there's simply no money in the budget to beef up the programs as they're now structured. Home-based services and nursing homes are funded from the same fixed pot of Medicaid money, but the nursing homes' slice of the pie is protected by law.

"State law does have our hands tied," he said. "That (nursing homes) program is probably one of the most structured in state law."

Questionable choices

In 2005, the Louisiana Legislative Auditor released a scathing 163-page report examining the state's spending on the elderly and disabled. Auditors identified irregularities in the state's nursing home policies and recommended adjustments they said would save the state tens of millions of dollars every year.

One change alone would have immediately saved Louisiana $44 million annually by adjusting the way the state's nursing homes were paid. The report found that Louisiana was including unusual factors in its nursing home reimbursement calculations that were driving up costs.

The auditor’s recommendations were endorsed by the Department of Health. 

But instead of heeding the advice, the Legislature went in the opposite direction, passing a law the next year that locked in the rate structure the auditors had deplored. As a result, changes to nursing home rates now require an act of the Legislature. The bill passed without a single no vote.

In addition to being unable to change the way nursing homes are paid, another state law also requires their rates be "rebased" at least every other year — a process that updates how much the state pays out to nursing homes based on their costs.

No other sector of the Louisiana health care industry that uses Medicaid gets such frequently mandated rate increases. Rebasing, which has regularly taken place more often than the law requires, has increased the average reimbursement rate by more than 54 percent over the last decade, more than double the rate of inflation.

Reynolds explained that part of the reason rates have skyrocketed is because the state was able to tap the Medicaid Trust Fund for the Elderly, created under Gov. Mike Foster's administration, to pay for some of those annual increases, offsetting part of the burden on the state's general fund.

When the $1 billion trust fund was being established by the Legislature, there was heated debate about whether home- and community-based services could get a piece of the pie, but they were ultimately excluded.

The bill creating the trust fund was sponsored by Tom Schedler, a Mandeville Republican who was then a state senator and is now the secretary of state. Even though home-based programs were left out, Schedler says he was hopeful the steady funding for nursing homes would free up money to fund other programs supporting the elderly.

Instead, the trust fund was quickly depleted because the state aggressively spent down the principal — rather than living off the interest, as intended — to cover rapid increases in nursing home rates that were approved even as the state budget was in free fall.

By 2015, the piggy bank was almost entirely empty, but the state was still obligated to make its payments. That year, the state had to hand over $233 million from the general fund to nursing homes, money that had previously been paid out of the trust.

Today, Schedler says he is mortified at the results. 

"When I think about the anguish to get this approved — the only people who benefited from this were the nursing homes," Schedler said. "It's appalling to me that they spent all this money. It's something that should be a nest egg for perpetual care."

Things actually got worse. Right before the trust fund was emptied, with a financial reckoning approaching, the Legislature voted overwhelmingly to put on the ballot a constitutional amendment that would give Louisiana even less budget flexibility for nursing homes.

The amendment, subsequently approved by state voters, prevents nursing home rates from being cut below their 2014 rate without a two-thirds vote of the Legislature.

Mulling managed care

Because state officials lack the flexibility in the budget to change funding for nursing homes, the state is also limited in ways it can expand services for home- and community-based providers.

One way state officials thought they could shift the balance, while saving the state money, was to move to a “managed care” model.

Under Jindal, oversight of many Medicaid services was contracted out to private companies. The idea was that private insurers, who would vie to manage the program, would determine what environment best suited elderly and disabled Medicaid patients.

The expectation was that the insurers would steer more people into home- and community-based services, since they are less expensive and the insurers are given incentives to save the state money.

But the plan was shut down abruptly a few months before Jindal left office, after nursing home officials — who had sunk more than $300,000 into Jindal's presidential bid — expressed opposition.

At the time, officials estimated the move to managed care would have saved the state $77 million a year by the third year it was implemented. The dollars were expected to come from a combination of the gradual but increasing savings the state would incur by slowly transitioning people to less expensive care, and rising revenue from a state tax on the managed-care companies.

That tax has since been more than doubled, to 5.5 percent. So if the changes aborted in 2015 were implemented today, advocates calculate a move to managed care could free up well over $100 million annually for the state. Eley, who worked on the original managed-care plan under Jindal, said the state is poised to earn $160 million a year with the increased tax. 

Jeffrey Drozda, CEO of Louisiana Association of Health Plans, an organization that represents the state's managed-care companies, estimated that the state would generate $130 million in the first year and more than $200 million every year after.  

Kliebert, Eley and Reynolds, who between them have more than 70 years of experience at the Department of Health, say regardless of the specific number, there's no question the state would have seen a big financial benefit from the model — and still could, if Gov. John Bel Edwards decides to pull the trigger.

"Absolutely, there would have been savings," Kliebert said. "Especially with the premium tax. It would have generated savings to the state and provided people with the options that they wanted. It was clearly a win-win for the state."

However, Berger, of the nursing home association, said managed care for the elderly hasn't been successful in most states. It's different from privatizing Medicaid services for other populations, because elderly and disabled people have more medical needs, he said. And independent studies in some states show managed care was more expensive; however, the higher costs were often associated with serving more people because access to health care improved.

Berger also said he believes quality suffers under the model because insurance companies, who intend to reap a profit, are added as middlemen. Because they have an incentive to keep patient costs down, care suffers, he said.

"In other states, we saw increased administrative costs, having to pull valuable resources away from patients to deal with issues of managed-care providers and an intentional denial of claims," he said. "No studies show that it improves quality, and no studies show it will improve costs."

It's the same position Edwards has taken, who said in a recent interview that he has serious reservations abut the reform, despite saying in August 2015 that it was his goal to expand managed care to nursing homes. However, Edwards said he believes managed care for the rest of the Medicaid population, which was implemented under Jindal, has been largely successful. 

Some members of the Legislature have also raised concerns about expanding managed care, pointing to the state's rocky transition to private management for general Medicaid services, initially called Bayou Health and now called Healthy Louisiana. In hearings at the Capitol last year, a handful of lawmakers complained that payments to providers were lagging and recounted stories of claims being denied.

But Reynolds said the state is both saving money and improving health care outcomes under the new setup.

In the five years since Bayou Health was implemented, the state saved an average of 9 percent per member, per month, and it improved itself in 21 out of 22 health care metrics monitored by the federal government.

Drozda said there's a plenty of evidence that managed care is saving states money while improving outcomes. He pointed to Iowa, which estimated it would accrue $118 million in savings this year from managed care after implementing it in 2013, and said Louisiana is demonstrating improvements from its own experience with Healthy Louisiana.

"In Louisiana, we've proven it in terms of quality and cost savings," Drozda said. "Most people don't want to be in a nursing home, and from a public-policy standpoint, we have an obligation to offer those services to the elderly — and, in this budget crisis, be able to put over $100 million of savings on the table." 

Advocates for the elderly and disabled in Louisiana also have reservations about turning power over to private insurers. But many said it's one of few remaining levers Louisiana has to try to shift services to home-based providers, amid the special protections granted to nursing homes.

Jeanne Abadie, who works for The Advocacy Center, said she was initially skeptical about managed care because she didn't like the idea of a profit-driven corporation making decisions about people's health. But, she said she warmed to the idea after deciding it was the best way for Louisiana to expand choice.

"Managed care would at least give people an option," she said. "So if people can be served with less expensive services, and they want that service, they can take it. People could have the option to live in their community."

State Rep. Walt Leger, D-New Orleans, sponsored a bill last year that would have initiated the process seeking managed care companies for the elderly and disabled population. But his bill died, in a committee meeting attended by a raft of nursing home industry leaders. Some legislators raised concerns about how privatization has played out with the delivery of other Medicaid services.

But Leger, a close ally of the governor's, said he believes it's good policy worth exploring.

"There's evidence that supports that there's a potential for savings through this mechanism," he said, adding that it would be an uphill battle to get any legislation passed. "I have worked with the nursing homes over the years, and they certainly have influence in the Capitol. So you know, with their objection to this, it becomes difficult to achieve an overhaul of this significance."

For this year’s legislative session, which began April 10, state Rep. Tony Bacala, R-Prairieville, has filed a bill similar to Leger’s. But a move to managed care doesn’t need the Legislature’s intervention: It could simply be initiated through the governor's office.

Never going back

More than a decade ago, Baton Rouge resident Pamela Pratt's father died in a nursing home. He lived there because he had Alzheimer's disease and members of the family weren’t able to give him the round-the-clock care he needed.

Home- and community-based services were even more scarce at the time.

But Pratt recalls thinking her dad seemed depressed in the nursing home. She said the family was frustrated because he often was dirty during visits; he smelled of urine because staff didn't immediately clean him up after accidents.

"He didn't last long in there, and I just felt like he deserved more health care and more attention," Pratt said.

Today, her 86-year-old mother Iola Lee lives with her. Lee has dementia and suffered a recent stroke. But Pratt is able to make it work with help from a home health nurse.

Pratt and her siblings all have day jobs, so without the personal care service, her mother would have to live in a nursing home — something that now seems unthinkable to Pratt.

"To put my mother in a nursing home is a huge no," Pratt said, adding that she has recently applied for increased service hours for her mother. "It's very important, and we want our mother cared for in the home."


Part 1 ... Profits over patients: How Louisiana values nursing homes over elderly, disabled 

Part 2 ... Profits over Patients: How a Tsunami of Campaign Cash Buys Favorable Policy for Louisiana Nursing Homes

Follow Rebekah Allen on Twitter, @rebekahallen.