by James A. Bacon
Republican leadership in the House of Delegates once again has slammed the door on Governor Terry McAuliffe’s proposal to expand Virginia’s Medicaid program. There are good reasons both for and against extending the entitlement but the decisive and most compelling argument is the likely inability of the federal government to honor its commitment to pay 90% of the cost of the expanded program far into the future.
If you need a sobering reminder of how dismal the long-term fiscal condition of the federal government is, just read this recent Senate Budget Committee testimony by Boston University economist Laurence Kotlikoff. As everyone knows, the national debt now exceeds $18 trillion. But that’s just the tip of the fiscal iceberg. The fiscal gap, the difference between revenues and obligations projected 75 years into the future, is $210 trillion — more than 10% of GDP. The gap between revenues and promises in the U.S. is worse than that of any other developed country, Kotlikoff said, worse even than Greece. (Hat tip: Tim Wise.)
If something can’t go on forever, eventually it won’t. At some point, whether ten years from now, twenty years, or thirty, the federal government will reach a crisis. There is a high likelihood that a future Congress will decide either to radically curtail Medicaid or to dump a significant share of the funding burden on the states. Either event would be traumatic for Virginians. This is not scare-mongering, it is arithmetic.
While rejection of Medicaid expansion may be fiscally justified, it leaves hundreds of thousands of poor and struggling Virginians without access to health care, except in emergency room settings. If Republicans and conservatives are going to reject the fiscally improvident expansion of Medicaid, they are obligated to present a different vision for Virginia’s healthcare future. We have seen bits and pieces of such a future — repeal the Certificate of Public Need (COPN) process that protects established companies from competition, and make patient-level data more widely accessible — but no one has articulated a coherent vision. Let me advance three propositions that may lead us to such a vision:
- The main reason that medical insurance has become so unaffordable for so many Virginians is that the underlying cost of providing that care has increased relentlessly over the decades faster than inflation and faster than the increase in wages and salaries.
- The primary thrust of public policy in the United States and Virginia has not been to stimulate productivity and innovation, making medical care more affordable for all, but to restrain cost increases by regulatory means and to redistribute wealth from the affluent to the poor in a zero-sum game. The resulting system, marked by rampant regulation, red tape, cross subsidies and an total lack of transparency, is a colossal failure.
- To make health care affordable and accessible, Republicans and conservatives need to champion market-driven competition and innovation that drive down costs and improve medical outcomes.
That’s the vision, but a vision is nothing more than words and generalities. Where do we go from here? There are three things we can do in the short term that will move us in the right direction:
- Eliminate COPN, which protects established hospitals from competition, not only from other hospitals and outpatient-care facilities but from entrepreneurs who might have novel ways to organize and deliver care. In so doing, we must recognize that COPN represents a back-door means of compensating hospitals for the significant sums they spend on indigent care, and acknowledge that some kind of political settlement will be necessary.
- Eliminate mandated health benefits, which limit the ability of health insurance companies to create innovate products for niche markets.
- Create market transparency. Patients have little consumer power in the medical marketplace because they cannot compare the price of different medical procedures or the quality of work performed by different hospitals and doctors. The methodological issues of comparing price and quality are formidable but not insurmountable. For market-driven health care to work, we must have price transparency.
That’s just the beginning. Thinking more long-term, we need to acknowledge that the concept of hospitals — centralized medical facilities that provide a bundle of unrelated medical procedures — may be outdated. The future belongs to the factory model in which specialized medical teams (doctors, nurses and others) work in specialized facilities with specialized equipment, and stay up to speed with the latest scientific knowledge about particular procedures or diseases. This specialization and knowledge allows them to treat patients at lower cost with better outcomes.
In parallel, insurance companies need to pioneer new reimbursement strategies that cover not just individual procedures but entire courses of treatment, rewarding medical “factories” described above for superior outcomes and lower costs.
Republicans and conservatives don’t have to come up with every answer. They’re politicians, not medical practitioners. But they do need to paint a picture of the future, eliminate legal and regulatory obstacles and push the health care industry in the right direction. If they fail to do so, the end result will be fiscal insolvency, hundreds of thousands of Virginians people dispossessed of health care, or a chronic health care crisis for all.
