Penny-Wise, Pound-Foolish. That would be Bobby Jindal, the Governor of Louisiana.

Governor Jindal:

NEW ORLEANS -- Starting Feb. 1 Louisiana will stop offering hospice care services to most patients on medicaid.
The Louisiana Department of Health and Hospitals is eliminating the service to families in the state due to state budget cuts.
Critics are up in arms.

The Louisiana Department of Health and Hospitals say the elimination of hospice care for medicaid patients will mean nearly $3.3 million in savings this year alone. In 2014, it'll mean $8.3 million in savings.
However, Burns believes the state will end up paying much more with terminally ill patients forced to turn to local hospitals.

Hospice care  is the palliative care of the terminally ill.  It is intended as a substitute for the kind of aggressive curative care which no longer works to keep the patient alive.  Hospice care may also provide additional benefits to the patients and their families in terms of psychological support and better pain relief.  The focus in hospice care is to improve the patient's quality of life in the last weeks of life. 

The "critics" referred to in that quote are people who think denying palliative care to dying people is cruel and callous and people who point out that this move is unlikely to produce any savings once we figure out what the alternative sources of care cost those patients will resort to.

I spent a little time looking for studies on the cost-effectiveness of hospice care for terminally ill people.  The majority of such studies show that hospice costs considerably less than the conventional care alternatives:

“Hospice is not just about managing death,” emphasizes Craig C. Earle, MD, MSc, Dana-Farber Cancer Institute (Boston, Massachusetts). “High-quality palliative care can be of great benefit to a patient, and that benefit accrues over time.” Hospice is beneficial in several realms, including the patient's quality of life, patient and family satisfaction, and cost effectiveness.8–12 One study even indicated that hospice significantly extended survival for patients with lung, pancreatic, or colorectal cancer compared with patients who did not receive hospice care.13
The Medicare Payment Advisory Committee (MedPAC) has also noted that the opportunity for a comprehensive palliative care program increases with longer hospice stays.4 Researchers have found that services as bereavement counseling, palliative care, and respite for caregivers was experienced by patients and families who used hospice for at least 7 to 8 weeks12 and that the maximum benefit of hospice is achieved by a stay of 80 to 90 days.8
The cost savings of hospice has been documented in several studies. A meta-analysis published in 1996 indicated that the use of hospice saved as much as 40% of health care costs during the last month of life and 17% over the last 6 months.10 In a later study, the health care costs specifically for patients with cancer were 13% to 20% lower for those who had received hospice care than for those who had not.11 Similar findings were reported in 2007: hospice use was found to significantly reduce Medicare costs during the last year of life by an average of $2,309 per hospice user.12 In addition, Medicare costs were reduced further the longer an individual was enrolled in hospice. Cost savings were more pronounced for patients with cancer than for patients with other diagnoses, especially for longer stays.12

What will those terminally ill Louisiana patients do when they are denied coverage for hospice care?  Continue using the existing care framework, including expensive hospitalizations, I would think.  The most likely outcome is that this move will increase the overall costs of taking care of these patients. 

That's what makes Jindal penny-wise and pound-foolish.  Sure, abolishing hospice care will show savings in that column but those savings must be compared with the increased costs of conventional hospital care for the terminally ill.  Unless Jindal somehow plans to stop the terminally ill patients from receiving any care at all, the outcome of this proposal will be an increase in the costs of Louisiana Medicaid program.

It's not even necessary to discuss Jindal's possible callousness or cruelty here (though hospice care also has many non-monetary benefits which the proposal also ends).  The proposal doesn't even save resources.

Duh.  Now I read that Jindal has backed away from the plan and that hospice care will continue be funded for the Medicaid recipients in Louisiana.  That's good news.  But it means this post is outdated before it's even out!

I'm still going to publish it because the proposal is a perfect example of the "press-the-balloon" approaches to cost containment in health care.  When you press the balloon at one end to make it smaller it just expands at the other end, and this is exactly the way many health care cost cutting programs work.  As long as the costs in the two ends of the balloon fall on different parts of the system the cost cutting program might look like a great success.  But once all the relevant costs are counted,  the savings often turn out illusionary.