Category Archives: Health Care

Va 2019 General Assembly session – prefiled House of Delegates bills

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Much ado about nothing.  As of this morning there were 83 prefiled bills for the House of Delegates and 225 prefiled bills for the State Senate.  With a few exceptions the House prefiles are pretty “ho hum”.  I will examine the Senate prefiles in a subsequent column.

One from column A and two from column B.  I use a somewhat arbitrary approach to categorizing the prefiled bills.  By my analysis … governmental process (17), education (12), crime and courts (10), election reform (8), finance and taxes (7), health care (6), nonsense (6), environment (6), transportation (4), campaign reform (4) and energy (2).

Governmental process.  These are the day to day clarifications, corrections and amplifications needed to make existing legislation more effective.  For example, HB246 clarifies the role of the code commission in preparing legislation at the direction of the General Assembly.  One of these bills will further depress Jim Bacon’s journalistic sensibilities.  HB1629 eliminates the requirement that Virginia procurement contracts be reported in newspapers.  Mixed in with the proposed routine legislation are some zingers.  For example, there are three separate bills to ratify the Equal Rights Amendment (HJ577, HJ579, HJ583).  There are also four bills proposing changes  to the Virginia Constitution.  HJ578 would add a right to vote to the state constitution, HJ582 would establish a redistricting committee, HJ584 would allow the governor to run for a second consecutive term and HJ585 has the governor and lieutenant governor running as a single ticket instead of separate offices.

Education.  The only theme in the education prefiles is an attempt to provide financial incentives for localities to rebuild the physical plant of their schools.  One of the more interesting bills would allow commercial advertising on school buses (HB809) while another would guarantee that our children’s God given right to wear unscented sun block not be abridged (HB330).

Crime and courts.  Bail bondsmen and bondswomen are forbidden from having sex with their clients (HB525) and shooting a police dog, or even showing a gun to a police dog,  becomes a more serious crime (HB1616).  Other than that, pretty mundane stuff.

Finance and taxes.  Way too many people and too many companies are paying taxes (HB966) and veterinarians really need a break from those pesky sales taxes (HB747).

Potpourri.  The remaining categories contain a few interesting ideas.  Del Rasoul wants to ban the use of fossil fuels in electricity generation (HB1635), Del Cole wants to give I95 some love (HJ580, HJ581) and he also has the radical idea that campaign contributions should not be for personal use (HB1617).  In fact, Del Cole’s proposed legislation is putting him perilously close to making my very short list of competent Virginia legislators.

Closer to home.  My delegate, Kathleen Murphy, continues to propose jaw dropping, eye popping examples of legislative uselessness.  She proposes to let her pals skirt Virginia traffic laws by displaying a special sticker on their cars (HB295) and offers some odd rules on distance learning reciprocity (HB659).  I guess issues like mass transportation don’t cross her mind these days.

— Don Rippert.

Medicaid Is The Story With State Budget

New hospital taxes collected from Virginia private hospitals in this budget cycle, and the federal matching Medicaid dollars they draw down. The larger portion covers higher payment rates, not coverage of new patients.

The General Assembly’s key money committees gathered in their annual end-of-year financial retreats last week to talk about Medicaid.  Sure, the state’s multi-billion-dollar budget delves into plenty of other areas that were mentioned, and the Amazon location announcement grabbed headlines, but the meetings were about Medicaid.

The explosive and uncontrolled growth of Medicaid is all but eliminating any new dollars for those other areas of state responsibility, and existing dollars are under pressure.  There is no point in talking about anything else.  The opportunity for tax reform due to windfall revenue may be short-circuited by Medicaid.  If the rosy projections of new state money from Amazon come to pass, every dollar may be needed for Medicaid.

Every year the Joint Legislative Audit and Review Commission (JLARC) does this dry report about the growth in state spending.  The simple bottom-line fact it has demonstrated over and over is that Medicaid is squeezing everything else out.  It looks back at a ten-year period and during the ten years leading up to and including 2017, 60 percent of all General Fund growth went to for Medicaid.

JLARC: 60 percent of the growth in state spending over ten years has gone to Medicaid (Department of Medical Assistance Services). The was before the 2018 expansion.

At the beginning of the period the state’s allocation to localities for public schools was the top expenditure, but it dropped down to second by Fiscal Year 2017.   During that same ten-year period, from FY 2008 through 2017, the Department of Education didn’t even make the list of the ten agencies with the highest growth in General Fund dollars.

Right behind Medicaid’s 60 percent of the new money over the decade was the Treasury Board (debt payments) and the Department of Behavioral Health and Developmental Services, the other state agency providing major direct medical services to citizens.  A similar chart from the 2009 report, looking at 2000-2009, had Medicaid getting 19 percent of the growth revenue, and the Department of Education 39 percent.  A healthy share of growth dollars going to education may never happen again.

Medicaid (DMAS) and Department of Education have switched places on JLARC’s latest report on state spending. This includes state and federal shares.

The figures in the JLARC report, of course, do not include the impact of the expansion of the program to an estimated 375,000 more recipients by July 2020.  Nor do they include the $463 million in cost overruns announced since the budget was adopted (several months late, remember) in the existing pre-expansion program.  Those will not show up in a JLARC look-back report until the 2020 report on Fiscal Year 2019.

That would be after the next election.

The state’s economy is improving and an additional $600 million or more in tax dollars are expected this year and next, the committee staffs reported, but about 75 percent of those new dollar will be needed for that overrun.

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Virginia’s Diabetes Problem

Source: Gallup-Sharecare Well-Being Index

Health may be correlated with income and Virginia may have the ninth-highest average household income among the 50 states, but the Old Dominion ranks 23rd in the nation for the incidence of diabetes, according to a Gallup-Sharecare report based on 2017 data. The incidence of diabetes has increased from 10.6% of the population to 11.1% since 2008-09. Meanwhile, in a parallel development, the incidence of obesity has risen from 25.1% to 27.3%.

Central Appalachia is particularly afflicted with the disease. West Virginia has the highest incidence in the nation, and among metropolitan areas, Kingsport-Bristol is ninth highest. Among Virginia metros, the rates are:

35. Washington — 9.3% incidence of diabetes, 24.6% obesity
75. Lynchburg — 10.8% diabetes, 29.5% obesity
76. Charlottesville — 10.8% diabetes, 21.9% obesity
100. Richmond — 11.7% diabetes, 31.3% obesity
103. Hampton Roads — 11.8% diabetes, 28.3% obesity
126. Roanoke — 12.5% diabetes, 32.1% obesity
185. Kingsport-Bristol — 20.3% diabetes, 34.8% obesity

The survey covers the 186 largest metro areas in the country.

The spreading prevalence of diabetes is distressing news for those afflicted by the disease. And, given the socialization of medical costs by means of government programs and innumerable subsidies and cross-subsidies, it is distressing for all of us who have to pay for it.

Gallup-Sharecare explained the economic costs associated with the disease:

If the diabetes rate had remained at its 2008 level, about 2.3 million fewer U.S. adults would have the disease today, and healthcare costs due to diabetes would be an estimated $19.2 billion less than current costs.

Diabetes not only impacts the U.S. economy through direct costs, but also through lower employee productivity due to unplanned absenteeism. After controlling for all major demographics as well as BMI weight class, over 57 million additional unplanned days of work are missed each year by workers who have diabetes as compared to workers without diabetes. This costs U.S. employers $20.4 billion annually.

Diabetes represents both a problem and an opportunity for Virginia. Medical costs weigh heavily upon the state, creating a major economic burden. Conversely, successfully targeting diabetes could reap an economic boon.

Bacon’s bottom line: I have become acutely attuned to the perils of diabetes since I was diagnosed with pre-diabetes a year ago. My glucose level has not risen to a dangerous level, but it’s been bouncing around in the undesirable zone. Since getting the unwelcome diagnosis, I have made tremendous efforts to take control of the situation. I’ve lost about 12 pounds and kept the weight off. I have altered my habits and routine to get more exercise (not a terribly hard thing to do because I enjoy exercise), and I have cut my carbohydrates (a very hard thing to do because it has meant giving up milk shakes and french fries).

If I can do it, so can others. And if others don’t do it, I get miffed. While there may be a genetic component to the disease, diabetes is largely the result of behavior. Why should I pay more in taxes and health insurance because others don’t make greater efforts to take care of themselves? Our system of health insurance creates a moral hazard — it does not punish poor habits or reward good ones. I don’t know how we, as a society, lick this problem. Treating diabetics like smokers and charging them more for insurance does not seem like a humane solution. But something has got to give.

Reminder: Health Insurance Sucks for the Rest of Us, Too

While Medicaid expansion and Medicaid funding continue to command the attention of Virginia lawmakers, health care insurance for the rest of us is inching closer to the crisis stage. The cost of the average employer-provided health plan rose 5.2% in Virginia this year, considerably faster than the 3.6% rate for employer plans nationally.

Virginia workers also paid an average of 27% of the total cost of coverage through paycheck deductions, compared to 25% nationally, according to the Richmond Times-Dispatch. Statewide, the total health benefit cost averaged $12,368 per employee. The T-D based its numbers on a 2018 survey released by the Mercer human resources consulting firm.

Those numbers don’t include what employees are spending out of pocket as health plans increase their deductibles. The number of employers offering high-deductible, consumer-directed health plans increased nine percent nationally from 29% to 38% in 2018. Under high-deductible plans, employees must spend thousands of dollars of their own money before insurance reimbursements kick in.

For yet another year, the cost of employer-provided health care exceeds the rate of inflation plus wage growth. The increasing cost of health care represents a material erosion to households’ standard of living. And what are Virginia lawmakers doing about it? Nothing much that I can see.

The Bernie Bro’s answer is to adopt a single-payer health system, or Medicare for All. That would have the virtue of eliminating a huge layer of overhead and red tape associated with private health insurers. But it would introduce a different layer of overhead and red tape associated with the federal government insurer. Overhead savings, if any, would be a one-shot deal. The underlying dynamics of continual cost increases would not change.

Republicans say we should open up the healthcare system to insurance competition across state borders, encourage people to create Health Savings Accounts, and promote consumer-driven health care. All are good ideas, to my way of thinking, but they are only partial and incomplete solutions. They do nothing to address the utter lack of price transparency and the inability of consumers (patients) to shop around for better deals for discretionary procedures. Neither Democrat nor GOP proposals address the reality on the ground: that health care markets are increasingly dominated by hospital monopolies and cartels that protect turf and freeze out competitors. While there is considerable innovation in medicine and technology, there is very little innovation in health care delivery.

There is considerable good thinking in the academic world on how to create viable healthcare markets — or at least there was a decade ago when I studied this matter more closely — but few of them have percolated into the political sphere. Perhaps Virginia could do something totally radical and assemble a conclave to explore ideas for market-oriented healthcare. Something has to give. Current trends are not sustainable.

Medicaid: the Program that Ate the Budget

Budget forecasters have under-estimated the cost of the Medicaid program by $202 million this year and $260.3 million next year, a total of $462.5 million in the biennial budget, reports the Richmond Times-Dispatch.

Finance Secretary Aubrey Layne was at pains to explain that the added costs were not related to Medicaid expansion covering an estimated 400,000 near-poor Virginians beginning in the new year. “This isn’t about expansion. This is about the base Medicaid forecast.”

Medicaid is growing by 6.2% compared to an estimate of 2.5%. For years, the $11 billion healthcare program for the poor has been crowding out spending for K-12 education, higher education, mental health, the environment, and other priorities. In rough numbers, the program now accounts for $5 billion of state spending in a $21 billion General Fund budget.

State officials had hoped that herding Medicaid patients into managed care programs might slow the rate of spending increases. They blamed a forecast based upon assumptions generated by an actuary, who has since been canned. The actuarial analysis overestimated the savings gained by switching from traditional fee-for-service to Commonwealth Coordinated Care Plus, a program that relies upon private insurance companies to provide managed care for 215,000 elderly and disabled Virginians. 

Doug Gray, executive director of the Virginia Association of Health Plans, said it’s not unusual for states to make mistakes in their forecasts when they move from a system based on provider billing to managed care. “When you first start a program like this, you’re guessing based on coming from fee-for-serve experience,” he said.

But officials also cited an unforeseen jump in the number of children enrolled in Medicaid ($52.8 million), delayed payments to hospitals for uncompensated care ($26 million), and updated hospital rates for serving children under the Medallion managed care program ($25.5 million).

If it’s any consolation, Layne says that Medicaid expansion actually will save the state money. How’s that possible? First, because the federal government will pick up 90% of the tab for the expanded program, as opposed to the 50% for the legacy program. Second, because expanded Medicaid will cover populations for which the state spends money in other programs.

That’s assuming, of course, the actuaries guess right on what the expanded program costs.

Healthcare Reform that Actually Reforms Something

Graphic source: Catalyst for Payment Reform

Virginia appears to be doing a better-than-average job, compared to other states, in shifting its health care system from a fee-for-service system, widely implicated in healthcare inflation, to a value-oriented system.

The logic is simple: If you’re a hospital, physician or other health provider, and if you’re reimbursed for the number of services you provide, you have an incentive to provide more services regardless of the effect on outcomes A value-oriented approach rewards the quality of the service. Reports The Virginia Mercury:

A new scorecard by Catalyst for Payment Reform, the Virginia Center for Heath Innovation and the Virginia Association of Health Plans shows that in 2016, 67.3 percent of payments made to doctors and other providers by commercial insurers in the state were value-oriented, meaning they had some payment component that rewarded doctors for the quality of care they provided.

Meanwhile, 36.6 percent of the total payments that the state’s Medicaid program made in 2016 through the insurers, or managed care organizations, that it contracts with were tied to value. …

Roughly, Virginia’s commercial insurers did about 20 percent better in making the shift to value-based payments than the national market, while Medicaid did about 4 percent better.

Bacon’s bottom line: Politicians in Virginia and the rest of the United States have been obsessed for years with who pays for health care, creating a zero-sum game in which every winner entails a loser. Politicos have paid far less attention to creating win-win scenarios through improved quality, productivity and innovation. Ideally, value-oriented payments move the emphasis in healthcare from inputs to outcomes.

The move to a value-oriented model represents a fundamental change and is a Very Big Deal. I have not had time, however, to decipher the public policy implications. Other than embrace the model for Medicaid, which the Commonwealth appears to be doing already, I’m not sure what lawmakers can do to accelerate the shift. Value-oriented healthcare may not be as easy to explain as “Medicare for All” or “Repeal Obamacare,” but voters should perk up and pay close attention.

A New Tax Policy Principle: Harm Reduction

Source: Legislative Services Presentation

Despite a long tradition of taxing traditional tobacco products, Virginia should not now tax the alternative products from the same industry based on nicotine-laced heated liquids because they serve the high social purpose of harm reduction, legislators were told Tuesday.

Carrie L. Wade of the R Street Institute, who never quite stated who had paid her to be there, told a meeting of the General Assembly’s Joint Subcommittee to Evaluate Tax Preferences that “good state regulation” of these products would “treat combustible products differently than non-combustible products” and “send a public health message through differential tax rates.”

The United Kingdom, Japan and Sweden have all found that nicotine delivery without benefit of fire has moved people away from cigarettes, she said.  In Sweden the product mentioned was smokeless tobacco inserted in the mouth, which is illegal in the European Union.  Asked why it was banned by the EU, she didn’t quite answer.

The reason of course is mouth cancer.

Having made uncounted billions selling a deadly and addictive product that King James I and Mary Baker Eddy understood could kill and having addicted government at all levels to the related tax revenue, the industry is now arguing that its newest and possibly slightly-less-deadly products should be tax free or at least taxed far less.

This being Virginia, where tobacco leaves decorate the House chamber ceiling, the assembled legislators listened patiently.  Lobbyist Reginald Jones on behalf of Altria was up immediately following Wade, mentioning his client’s 3,700 Virginia employees and billions in sales and its downtown Richmond research center now focused on “heated products” which are “less harmful products.”   He too used the new key phrase:  harm reduction.

Jones was deeply appreciative that the committee would consider this issue, but it was merely responding to a mandate slipped into the state budget, a small item sponsored by Senate Finance Committee Chairman Emmett Hanger.  “I view this as the beginning of a process,” said Hanger.   Some lobbyist certainly handed him that language and requested its insertion, perhaps the same one so grateful to be there.

Over the years I’ve devised several laws to explain the world of politics and government, and today I formulated a new one:  the more obscure a budget language provision, the more delayed its appearance into the sunlight, the more interesting it will turn out to be.  This legislative study committee was created to trim the instances of special tax treatment in Virginia law, but this discussion was all about preserving or enhancing one.  That’s the kind of lobbying creativity that produces the big bucks.  Scores of lobbyist meters were running in the room.

Virginia does not now tax these vapor products except for the standard sales tax.  Traditional tobacco products suffer an additional excise tax at the state level (the second lowest in the country) and in most cities and towns.  The local taxes can be higher than the state tax and the patchwork of more than 100 different tax authorities has always annoyed the industry.  Customers can usually go a short distance to another locality for lower-tax product.  That is in part what the budget language meant by “modernization.”

Combined the state and local levies produce about $200 million in revenue, but the amount has been dropping steadily as tobacco use declines, in part due to switchers to vaping and also because new state laws reduced cigarette smuggling from Virginia to high-tax states.  Over the past few sessions a handful of bills – all quickly killed – have proposed extending taxes to vapor products.

The most recent, House Bill 2056 in 2017, proposed a five cent per milliliter (or about $1.50 per ounce) tax on the liquid and a ten percent tax on the various devices to use it, such as those pictured above.  Seven other states and the District of Columbia are already taxing one or the other, but usually not both.

Delegate Mark Keam of Vienna was one of those most engaged in the conversation and, after assuring everyone he thought what informed adults did in this area was fine with him, asked if there had been previous discussions of whether or how to tax these increasingly-attractive products.  Not really, he was told.  As noted any previous bill had never even gotten a vote in committee.

Wade also argued against any effort to regulate the use of attractive flavorings in the products.  Adults are just as fond of them as younger users, and hence they are an element of harm reduction.  “We want to keep these products away from kids, but we think we can do that with existing regulations,” she said.

As Virginia contemplates special taxing treatment, the Food and Drug Administration is on the warpath over the explosion of these products among young people.  Given how the industry marketed cigarettes as healthy and featured doctors in their advertising, perhaps these new health claims should be viewed with at least a little suspicion.

Forecasting Medicaid Costs and Risks

Beginning Jan. 1 of next year, able-bodied adults earning up to 138% of the Federal Poverty Limit (FPL) will be eligible to enroll in Virginia’s expanded Medicaid program. The financial impact on Virginia taxpayers will depend in large measure upon the percentage of eligible recipients that decide to enroll. A lot of people have taken a lot of guesses, but no one will know the financial impact until the expansion goes into effect and people either enroll or don’t.

A new Old Dominion University study, “The State of the Region; Hampton Roads 2018,” has taken a close look at the numbers. “Every estimate is fraught with uncertainty,” write the authors. “The best course of action is to present a range of outcomes.”

The percentage of the eligible population that enrolls is referred to as the “take- up” rate. In 2016, the Urban Institute estimated a take-up rate of 56.8% for a potential Medicaid expansion in Virginia. In 2017, the Virginia Department of Medical Assistance Services estimated that of 370,000 qualifying Virginia adults, 239,000 would enroll in Medicaid and 60,000 would transfer from other health insurance plans — effectively a take-up rate of 64.5%.

The ODU economics professors writing the study took their own crack at estimating the take-up rate for Hampton Roads. Drawing upon the experience of two neighboring states that expanded Medicaid in 2016, Maryland and West Virginia, they estimated a take-up rate of 44% for people under the poverty line and 55% above. Recognizing the uncertainties of any forecast, they estimated 20,000 newly eligible adults on the low side and 27,000 on the high side. Based on those forecasts, they estimated that costs to the Commonwealth for new enrollees in Hampton Roads will run between $16 million and $22 million by 2021.

The authors consider the expansion a net economic gain for Virginia and the region: improving health incomes for lower-income Virginians, reducing the level of bad debts and uncompensated care, and improving the financial health of hospitals.

But, just as continued increases in military spending in Hampton Roads is contingent upon the condition of the federal budget, the authors caution that the modest state share of the expanded Medicaid program — only 10% for new enrollees — is likewise contingent upon the condition of the federal fisc.

Interest expenditures on the national debt are projected to climb from $316 billion in FY 2018 to $992 billion in FY 2028, crowding out other categories of funding. “An economic downturn that places significant pressure on the federal budget could result in a retrenchment of Medicaid eligibility and an increase in the uninsured rate,” the authors warn. “While history may be a guide, it’s not a promise.”

If the federal government reduced its reimbursement rate for new enrollees from 90% to 50%, the financial liability to Virginia would increase five times.

Medicaid expansion is a done deal. There’s no point in re-litigating that case. But Virginia has to live with the fiscal consequences. And one of the things that happened when the General Assembly passed the expansion bill is that the Commonwealth assumed a risk that the federal government will not renege on its 90% promise. We have no way of knowing what will happen over the next decade — we don’t even know for sure how much Medicaid will cost us next year. But we can identify risks and prepare for them. The question is, will we? Or will we stumble forward blindly on the assumption that all will be well?

Update: Response to this post from the Department of Medical Assistance Services can be viewed here.

Who Pays for Health Care in Virginia?

Source: “State of the Region: Hampton Roads 2018:

Where do Virginians (and Hampton Roadsters) get their health insurance coverage? Like their compatriots in every state, Virginians rely upon an assortment of private- and public-sector programs. The table above, taken from “The State of the Region: 2018 Hampton Roads” report, shows that in 2016 a higher percentage of Virginians (59%) had employer-based coverage than Americans did nationally. Virginians also had a higher percentage (12%) of military Tricare coverage — with the percentage spiking to 27% in Hampton Roads.

Virginians relied slightly less in 2016 upon Medicare than other Americans, and much less upon Medicaid — a gap of nine percentage points. But the percentages will change as Medicaid expansion takes hold in Virginia, enrolling an estimated 400,000 near-poor.

Keep a close eye on the numbers. As the percentage of Medicaid recipients goes up, which categories will shrink? Ideally, the percentage of uninsured drops dramatically. We don’t want to see a drop in “employer based” insurance and “direct purchase” insurance (which I presume refers mainly to Obamacare), which would represent a shuffling of people from one insurance system to another, not an expansion of coverage. Let’s hope the ODU authors of the 2018 Hampton Roads report revisit the Medicaid issue next year.

Pulling Teeth: Admitting Errors in Dental Care Post

In a column posted last month, “The Political Economy of Dental Care,” I suggested that one way to improve the affordability of and access to dentistry services in Virginia might be to reduce the cost of educating dentists. I highlighted the high cost of completing a dental degree at the Virginia Commonwealth University, Virginia’s only school of dentistry. While I still maintain that the cost of attendance is so high that graduates feel compelled to set up shop into metropolitan markets where they can earn enough to pay off their student loans, I got some of my facts wrong.

In the post, I stated that the cost of attending the VCU School of Dentistry runs about $133,000 to $140,000 per year over four years. In fact, according to data published on the school’s website, the cost for in-state students runs between $85,000 and $89,000 a year and for out-of-state students between $114,000 and $119,000 — high, to be sure, but considerably lower that what I stated. (The four-year cost is estimated to be $344,000 for in-state students and $461,000 for out-of-state residents.

Compounding my initial misperception, I also stated that the cost of attendance at VCU was significantly higher than the national average. To the contrary, the School of Dentistry cites American Dental Association (ADA) data to the effect that VCU’s cost of annual D.D.S. education was lower than the national average for in-state students in 2017-18 —  $59,569 compared to $64,305. However, the cost for out-of-state students was somewhat higher — $88,073 compared to $81,939. (I’m not sure how the ADA data is reconciled with the cost-of-attendance figures on the School of Dentistry’s website.)

Thirdly, ADA data contradicts my speculation that Virginia dentists might graduate with higher debt than their peers outside the state. In 2017, the average debt was $162,384 for a VCU in-state student, $207,924 for a VCU out-of-state student, and $239,895 for students at public dental colleges nationally.

I also argued that “dental technicians” should be given freer rein in under-served rural areas to provide dental-related services. Nan Johnson, director of communications for the School of Dentistry, informs me I was using improper nomenclature. The term “dental technician” is not used in the profession. Rather, the classifications of those who work with dentists are referred to as dental assistants, dental hygienists, or dental laboratory technicians.

Finally, I referred to the Virginia Oral Health Coalition as “an alliance representing the dental profession.” In point of fact, says Johnson, it is an alliance “to ensure that all Virginians can access affordable, comprehensive health care that includes oral health.” The Coalition includes not just dental professionals but educators, health care providers, and community members.

I am duly chastened. I think the larger points of my piece still stands — the high cost of dental school aggravates the shortage of dental services in rural areas, and the dental profession’s solution is to increase federal and state spending rather than address the cost side. But it helps no one to employ inaccurate facts. Further, I had no basis for singling out the VCU School of Dentistry as being especially expensive. The high cost of dental education appears to be a national problem.

The Political Economy of Dental Care

The bad teeth guy in the movie “Deliverance”

No sooner has Virginia enacted one vast new entitlement, Medicaid expansion, than the drumbeat begins on the next. No matter how much money government dedicates to health care, food, housing, education, transportation, legal aid, or whatever, there is always someone who is getting the short end of the stick by comparison. Always. And the answer is always the same: Expand entitlements. Always.

The latest case in point is an article in the Virginia Mercury highlighting the deficiencies in dental care experienced by hundreds of thousands of Virginians — a dental gap bigger than void in the bad-teeth guy’s mouth above. No question, the problem is a real one. Dental care costs too much for poor and working-class Virginians to afford, assuming dental care is even available in under-served rural areas. And the consequences of poor dental hygiene can lead to serious medical complications.

What’s the solution? Reports Katie O’Connor:

For years, advocates, such as the Virginia Oral Health Coalition have pushed the state to add a dental benefit for adults. So far, Virginia has expanded dental benefits to pregnant women and children until they turn 20.

As of the start of this year, 17 states offered extensive dental benefits — including preventive and restorative procedures — to their Medicaid populations, according to the Center for Health Care Strategies, a group that advocates for improved health care delivery for low-income Americans.

A benefit, advocates argue, would make a major difference for the 1.2 million adults covered in the state’s Medicaid program.

Creating the entitlement in Virginia would cost between $24.4 to $60.8 million, O’Connor says.

Of course, you’d expect from an alliance representing the dental profession to advocate a new entitlement that creates more business for the dental profession. It should surprise no one that the proffered solution to the problem entails transferring money from taxpayers to dentists.

Here’s a different idea. Expand the supply of dentists and dental technicians. How? Maybe start by reducing the total cost of attendance at the Virginia Commonwealth University School of Dentistry, which now runs about $133,000 to $140,000 per year over four years. Nationally, dentists graduating in 2016 carried on average $261,149 in debt, according to the American Dental Education Association. That number could well be higher in Virginia where the tuition runs considerably higher than the national average.

I don’t know why the VCU dental school is so expensive. I conjecture that the tuition bears little relationship to the cost of actually providing the education, and that someone high in the VCU hierarchy has made the calculation that the university will charge what the market will bear. I further conjecture that the School of Dentistry is a lucrative profit center, which VCU is milking for revenue to subsidize other programs. I may be entirely wrong, but when tuition is higher than almost anywhere else in the country, that’s a proposition worth looking into.

Now, if you entered a profession that took you four years to complete (which means four years of earning no money) and cost you roughly $500,000 in tuition, fees, room, board and expenses, leaving you $260,000 in debt when you graduated, would you want to move to Southwest Virginia where there is a paucity of patients capable of paying charges sufficient to help you retire your loans? No, unless you’re incredibly idealistic and willing to live at the foot of the cross, you’ll move to the suburbs where you can make $150,000 a year and pay off your debts.

Let me venture another hypothesis, which any enterprising reporter could verify or falsify: Given the sky-high cost of tuition, Virginia dentists have exercised their clout through Virginia’s professional licensing system to restrict competition from allied professions, such as dental technicians. I would conjecture that dental technicians, like nurses, are seriously circumscribed in what they can do or the circumstances in which they can practice.

Dental technicians earn about one-fifth of what dentists earn. Yet in my personal experience, dental technicians do 30 or 40 minutes of work cleaning teeth and taking x-rays while my dentist spends about 5 minutes checking things over. I love my dentist — he’s a great guy, and I’ve been using him for 30 years. But I’ve really got to wonder why it costs me $200 a visit when dental technicians are paid (on average) about $35,000 a year or the equivalent (taking benefits into account) of maybe $30 an hour.

I’m betting that (1) dentists exercise a strangle hold on the ability of dental technicians to provide independent teeth cleaning services, and (2)bill for technician’s services at a rate that many would consider obscene. Perhaps such practices, if in fact they occur, are justifiable in areas with no shortage of dental practitioners. But are they justifiable in areas that can’t attract dentists? Would it not be better to provide access to dental technicians to maintain dental hygiene at lower prices and make referrals as needed to dentists to fill cavities and perform other more advanced procedures?

I have no expertise whatsoever in the practice of dentistry, and I fully concede that I may be making some naive statements here. But I am convinced that we need to look differently at the problem. Instead of asking whether we should expand entitlements, perhaps we should be looking at how to expand supply and bring down costs.

Peeling Back the Layers of Hospital Dysfunction

Image source: Wall Street Journal

There are many layers to the dysfunction of America’s (and Virginia’s) health care system. I have written frequently about price opacity, the inability of consumers to compare medical services by price. Prices are essential to a market-based economy. Indeed, one could say that without prices, it is impossible to have a market-based economy. I’m not sure how you’d label the system we do have — there’s too much private ownership to call it socialism. But whatever it is, it sure as hell isn’t a market-based system.

The question I continually ask is why. Why is there no price transparency? Part of the problem is the convoluted system in which hospital charges bear no relationship whatsoever the cost of providing the service. Hospitals post charges. Government programs (Medicare and Medicaid) and insurance companies negotiate the posted charges to a lower level. And consumers pay some residue of those lower charges based upon how generous their insurance plans are. I chronicled my own experience with price opacity in the Richmond health care market when I elected to undergo hip-replacement surgery. (See “One Man’s Descent into Healthcare Price Opacity.“)

A recent Wall Street Journal article suggests that the dysfunction is so extreme that hospitals themselves often don’t know how much it costs to perform a routine, commoditized procedure such as knee replacement surgery.

The article highlights a rare instance in which a hospital, the Gunderson Health System’s hospital in La Crosse, Wis., undertook a study to find out how much it cost to conduct a knee replacement surgery. The hospital had been routinely jacking up its charges by about 3% a year, reaching a list price of $50,000 by 2016. But no one knew how much it actually cost to do the surgery. After a detailed, 18-month review, the hospital concluded it cost at most $10,500 — including the physicians.

Thus, another part of the answer to my question is the failure in hospital accounting. Hospital charges are largely unrelated to cost because the hospitals themselves often don’t know what procedures cost. If hospitals don’t know what routine procedures cost, how can they make rational business decisions? How can they exercise cost controls? No wonder health care costs go nowhere but up.

Writes the Journal:

Hospitals can be shielded from the competition that forces other industries to wring out expenses and slash prices. Hospital list prices are a starting point for negotiations with insurance companies over what they will actually pay, and those deals are confidential. Consolidation has given hospitals greater pricing power in many markets, according to health-economics researchers.

“Being cost effective was not an imperative in that type of market dynamic,” said Derek Haas, chief executive officer of Avant-garde Health, a health-care cost and quality analytics company that worked with Gundersen. …

For consumers, the prices paid for the surgery at some hospitals in the U.S. were more than double the prices at others, according to an analysis of 88 million privately insured people to be published in the Quarterly Journal of Economics.

In a market economy, competition would work to drive down the price of elective surgical procedures. If Hospital A charges an excessive price for knee replacement surgeries, orthopedic physician’s practices or a competing hospitals could enter the marketplace, charge less, and gain market share. But here in Virginia, hospitals have consolidated into massive health care systems, and they have shut down competition through Certificate of Public Need regulation. Regulations restrict entry of newcomers into the medical marketplace, thus conferring monopoly-like protections on hospitals. Virginia hospitals are not compelled to drive down costs and reduce charges to stay in business. They just ratchet up their charges each year, immune to pressures from the marketplace.

So, what is Virginia’s political class doing about this? Basically, nothing. Rather than address the core issues of competition and price transparency, the political class is focused on doing what it knows how to do, which is rob Peter to pay Paul — in other words to redistribute wealth. Thus, the public policy debate in Virginia focuses on Medicaid expansion and who pays for it. Meanwhile, costs for everyone, rich and poor and in-between, continue to rise with no end in sight.

The Hidden Costs of Medicaid Expansion

This column, originally published by the Chesterfield Observer back in June, is a bit dated. I neglected to re-post it on Bacon’s Rebellion at the time. But, what the heck, with the new debate about how to dish out Virginia’s windfall from federal tax reform, it never hurts to remind middle-class taxpayers how they continue to get the shaft.

After years of debate Virginia has enacted Medicaid expansion. Backers of the new entitlement proclaim the legislation a humanitarian triumph, providing health insurance to as many as 400,000 Virginians above the poverty line and injecting some 2 billion federal dollars into Virginia’s health care system. Miraculously, the state will deliver this new benefit at seemingly no expense to Virginia taxpayers. The federal government will pay 90 percent of the cost, while the balance will be recouped through reduced expenditures on prisons, mental health and other state programs, plus a tax on hospital revenue.

As the old political saying goes, if something sounds too good to be true, it probably is. It always pays to dig deeper to uncover what the politicians aren’t telling you. And in the case of Medicaid-expansion funding, there’s a lot they are glossing over.

First, Virginia’s 69 private, acute-care hospitals will pay a $281 million provider “assessment” in the first two-year budget. Second, legislators need to find a comparably large sum to bolster Medicaid payments to physicians. By the time it all shakes out, taxpayers and paying patients could end up paying, by my estimate, on the order of $250 million a year in higher taxes and/or insurance fees – although, to be honest, no one really knows.

What, you didn’t read that in the newspaper? Gov. Ralph Northam and GOP lawmakers didn’t tout these costs among their list of legislative accomplishments? Welcome to Virginia government in the 21st century. The political class has perfected the art of picking your pockets so quietly you don’t even notice.

According to the Virginia Hospital and Healthcare Association, Virginia’s health care program for the poor at present reimburses providers only 71 percent of the cost of treating Medicaid patients – well below the 78 percent rate that state code declares to be an acceptable level. Virginia hospitals also provide hundreds of millions of dollars’ worth of charity care – free or discounted health care provided to low-income patients – and write off hundreds of millions more on bad debts. On top of that, the Medicare program for retirees is squeezing hospital payments, too, although not to the same degree. The VHHA claims that the Medicare shortfall reached $909 million in 2016.

Under those circumstances, hospitals have been reluctant to absorb the cost of a provider “assessment” to pay for Medicaid expansion. But in negotiations with legislators this year, hospital lobbyists folded. They backed the provider assessment knowing they’d gain roughly $2 billion in extra federal dollars.

Where will hospitals find $241 million for the assessment? That’s not at all clear. Collectively, Chesterfield hospitals generated almost $1 billion in revenue in fiscal 2016, according to Virginia Health Information data. They paid about $100 million in charity care, wrote off roughly $75 million in bad debt, and ran profits of about $80 million. In the first year the assessment will be 1.1 percent of net patient revenues, or about $10.8 million based on 2016 revenues; the second year the tax will be 2.3 percent, or about $23.6 million.

In theory, the influx of Medicaid dollars will reimburse hospitals for most of the cost of treating near-poor patients who account for the bulk of that charity care and bad debt, offsetting the tax assessment. No one has projected how it will impact finances on a hospital-by-hospital basis across the state. And no one has provided any guarantee that hospitals won’t pass on the cost to their privately insured patients. We don’t know what will happen. The hospitals probably don’t know yet either.

A related problem is that Medicaid’s reimbursements are so chintzy that many physicians don’t accept Medicaid patients. When there’s a physician shortage to begin with, the result is that many Medicaid recipients won’t be able to find a doctor. They’ll continue seeking treatment episodically in hospital emergency rooms, as they always have, undercutting a key rationale of expanding Medicaid in the first place.

Legislators have discussed raising the reimbursement rate for physicians from 71 percent of cost to 88 percent of cost, enough to induce most doctors to take on Medicaid patients. But that will require tens of millions of dollars more each year. A report by the Richmond Times-Dispatch mentioned a figure of $47 million, but that would average out to about $27 per Medicaid patient per year, which seems absurdly low. To boost physician reimbursements to a meaningful level, lawmakers likely will have to ask for a much larger sum in a future session.

Hospitals and doctors are following these developments closely and protecting their interests. Most Virginians aren’t. My prognostication: They’ll come out OK – and you’ll get stuck with a big Medicaid bill.

The Social Cost of Domestic Violence

Intimate Partner Violence (IPV) accounts for more than one in seven violent crimes in the United States. Between 16% and 23% of American women experience IPV while pregnant. Social science researchers have suggested that domestic abuse affects not only the mother-to-be but her unborn children, but the social cost of the problem has been difficult to measure.

A new study by three women, two economists and a health policy researcher, have found a way to compare the outcomes of women subjected to assault while pregnant versus those suffering violence up to 10 months after the estimated due date. They estimate the social cost per assault during pregnancy of nearly $42,000, implying a total annual cost to society of more than $4.25 billion.

“We find that prenatal exposure to assault is associated with an increased likelihood of induced labor, which is likely a response of the healthcare system to injuries sustained by pregnant victims of abuse,” write the authors of “Violence While in Utero: The Impact of Assaults During Pregnancy on Birth Outcomes,” a working paper published by the National Bureau of Economic Research.

There’s something in this study for everyone. For law-and-order types, the study shifts the prevalent preoccupation with the injustices of mass incarceration to the victims to crime. In addition to the obvious victims, the women subjected to assault, there are invisible victims: the lower birth-rate babies. Oh, and let’s not forget the general public, which winds up paying the medical bills to treat those  babies.

For social justice warriors, the authors remind us that “violence in utero is an important potential channel for intergenerational transmission of poverty.” Indirect costs come from increased childhood disability, decreased in adult income, increased medical costs associated with adult disability, and reductions in life expectancy. “Our results imply that interventions that can reduce violence against pregnant women can have meaningful consequences not just for the women (and their children), but also for the next generation and society as a whole.”

The authors don’t address the oft-noted observation that the American medical system has higher infant mortality rates than other developed countries. But their research sheds light on that phenomenon. The implication is that the higher incidence of infant mortality represents a failure of the U.S. health care system. But perhaps it really represents a higher rate of domestic violence than in other countries.

Hospital Collections Are Ugly but Not the Real Problem

Source: The Virginia Mercury

I have big issues with the way hospitals conduct business in Virginia, especially the highly profitable nonprofit hospitals, as I have repeatedly made clear on this blog. But there’s one thing I don’t have a problem with — the fact that they try to collect their bills. Some observers find that practice problematic. Witness the recent story published in the Virginia Mercury, which kicks off this way:

Annie Washington is 60 years old, has diabetes and no insurance. If she needs to see a doctor, she winds up in the emergency room. But while hospitals can’t turn indigent patients away, they can still bill them. And when patients can’t afford those bills, collection lawsuits often follow.

“I work at McDonald’s,” the Henrico County resident said after a recent hearing over an $860 lawsuit filed by the doctors group that staffs VCU Medical Center. “There’s no insurance there.”

Virginia medical providers filed more than 400,000 lawsuits over the past five years, netting more than $587 million in legal judgments against their patients, an analysis of state court records by the Virginia Mercury has found. The review relied on data collected by virginiacourtdata.org, which aggregates online state court records.

Virginia Mercury deserves credit for plumbing a data source which heretofore has gone unreported upon. I appreciate the reporters’ enterprise. But I take issue with the implication that there is something disreputable about making an effort to collect unpaid bills. The capitalist system is based upon the premise people pay for the things they buy. The underlying problem with Virginia’s health care system is not that hospitals ask people to pay their bills but the insane way — insane, as in utterly disconnected from reality — that they calculate the bills in the first place.

Hospital charges, which are deeply discounted for Medicare, Medicaid and private insurers but not for individuals, are obscenely and unconscionably high. Many people, perhaps most people, are unable to pay the charges. But what are hospitals supposed to do? Not bill people without insurance? Or, if they don’t pay, make no effort to collect? If it is widely known that there are no repercussions for failure to pay, what incentive is there for anyone to pay?

Hospitals routinely provide charity care and write off unpaid bills. But how are they supposed to know who has the capacity to pay and who doesn’t unless they try to collect?

Sentara Health System, according to Virginia Mercury, uses predictive data analytics like credit scores to surmise who might be able to may and who might not. Bon Secours has adopted a policy of forgiving the debt of anyone whose income is 200% of the federal poverty level. That’s all very admirable, but there’s always a cut-off at which the people just below the line (whether credit score or income) get off free and people just above the line get stuck. A precept of the welfare state is that no matter where you set the line, there is always someone who draws the wrong side of it and there’s always someone deserving of compassion. Because there is always a victim, there is always a reason to draw a new, more forgiving line. That is not a sustainable model for a health care system.

If we want to address root causes, we must address the skyrocketing price of healthcare — both the cost of providing the care, caused by the cartelization of the industry, and the setting of insanely high nominal prices, the sole purpose of which is to establish a starting position for negotiating with insurance companies.