Report offers $2.7 billion in savings, revenue ideas

Advocate file photo -- The Louisiana state capitol in Baton Rouge. Show caption
Advocate file photo -- The Louisiana state capitol in Baton Rouge.

State workers’ insurance biggest target

A private consultant’s ideas for generating an additional $2.7 billion across state government include selling state property, hiring additional tax auditors and encouraging Medicaid patients to skip the hospital and give birth at home.

A good chunk of the recommendations would affect state workers. Their legroom at work could shrink in order to maximize space. Their insurance benefits could be changed in order to save money.

The Jindal administration released Alvarez and Marsal’s 425-page report Monday, during the hectic final minutes of the 2014 legislative session. The New York global management firm will receive roughly $5 million to study the operations of the state Department of Revenue, the state Department of Transportation and Development, the Louisiana Department of Economic Development, the state Department of Health and Hospitals, the state Department of Children and Family Services, the state Department of Public Safety, the state Department of Corrections, Juvenile Justice and the Division of Administration.

“I am so proud of this report. These are real, common-sense solutions that will not only save money for the people of Louisiana, but will improve the way we operate,” Commissioner of Administration Kristy Nichols said in a prepared statement. Nichols is Gov. Bobby Jindal’s top budget adviser.

The state already closed ferries, reduced vehicle fleets, shut down a prison and eliminated a workforce training program. The report produced new cost-cutting ideas.

Alvarez and Marsal said it spent more than 15,000 hours looking at agency operations and produced 72 recommendations that will generate $2.7 billion for the state over a five-year period. The money will come from savings or additional revenue.

More than $1 billion would be generated at the Office of Group Benefits, which provides health insurance to 230,000 active and retired state workers and their dependents. Much of the office’s book of business was privatized, reducing the workforce from 389 to 79.

Alvarez and Marsal cited a number of problems with the office’s operations: Medical and pharmacy claims are too high per member, members can enroll and drop coverage at any time and the premium rates for the major medical plan don’t cover expenses.

The consultant’s solutions include plan adjustments, rate increases, a diabetes prevention and management program, open enrollment periods and standard benefit limits on medical and pharmacy plans. Few specifics were offered on what the plan adjustments and benefit limits would entail.

Between 2012 and 2013, the Jindal administration reduced insurance premiums by 8 percent. Beginning July 1, the rates are going up 5 percent, as part of an effort to stabilize the program.

At the state Department of Revenue, Alvarez and Marsal found that the agency’s lawyers are juggling 2,668 outstanding tax cases involving $757 million. The consultant recommended hiring collection lawyers to secure judgments, allowing staff attorneys to focus on complex cases and having someone determine which cases should be settled.

Alvarez and Marsal also recommended hiring additional auditors to help the state capture more tax dollars, including sales taxes that may not be winding up in the state treasury.

At the state Department of Health and Hospitals, the contractor looked at a number of issues. Alvarez and Marsal found that Louisiana has one of the lowest rates of home births. Only one in 500 babies is born outside a hospital in Louisiana.

"Receiving prenatal care from certified nurse midwives and supporting staff including doulas and giving birth at home or in a free-standing birthing center is a cost-effective option for low-risk mothers that has been shown to produce birth outcomes at least as favorable as those of hospital delivery," the contractor wrote.

The Affordable Care Act allows states to provide Medicaid coverage for deliveries at free-standing birth centers and for midwife services. Alvarez and Marsal said that if just 0.72 percent of Medicaid patients delivered in that manner versus hospitalization, $442,000 in savings would be generated.

For thousands of people coping with age, disease or developmental disabilities, the state provides care attendants who go to their homes or workplaces and lend a hand. The service cost the state $761 million in the fiscal year that ended on June 30, 2013.

Currently, the care workers track their time on paper. The report contends that overstating work hours by six minutes would result in added annual costs of $76 million. Alvarez and Marsal recommended switching to a telephonic timekeeping system that requires the care worker to make a call and provide a pin number or voice recognition at the beginning and end of a shift.

Other recommendations include:

  • Attracting more bidders and reducing rates for insurance on state-owned property
  • Selling property
  • Implementing computer-aided-dispatch technology for State Police
  • Increasing caseloads for probation and parole officers supervising juvenile offenders
  • Tackling “light” renovation projects at state buildings to maximize office space
  • Converting part of a state agency’s fleet from gasoline to natural gas for annual savings of $900,000
  • Increasing rates for pipeline right-of-ways
  • Reducing insurance coverage on state-owned ferries and barges.

Follow Michelle Millhollon on Twitter, @mmillhollon. For more coverage of Louisiana government and politics, follow our Politics Blog at http://blogs.theadvocate.com/politicsblog.