Healthcare Spending Drives Growth in Virginia Budget over Last 10 Years

by James C. Sherlock

On December 16, the Director of the Virginia Department of Planning and Budget provided a briefing for the Joint Meeting of the Senate Finance and Appropriations Committee, the House Appropriations Committee, and the House Finance Committee.  

The subject was the Governor’s proposed amendments to the 2020-2022 Biennial Budget. The Governor submitted the revised budget discussed in that briefing and it was introduced as matching bills by the chairpersons of the Senate and House appropriations committees on December 16.

There is plenty of information of interest in there. 

There are commentators on this blog far more experienced than I in the Virginia budget, but I have pulled out two charts that make a point.

Healthcare (Medicaid and Behavioral Health & Developmental Services) is eating the budget at an ever growing rate. If the relative growth rates are sustained, it will soon surpass K-12 education funding.  If we accept the growth rates in excess of inflation, then taxes must increase to meet it.

When we talk about uncontrolled cost increases in healthcare in Virginia, the budget is one of the losers.

That may or may not be OK with readers, but it must be faced.

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33 responses to “Healthcare Spending Drives Growth in Virginia Budget over Last 10 Years

  1. Cumulative inflation over the last 10 years: 21%
    Virginia population growth over the last 10 years: 6.7%
    Total inflation and population: 27.7%

    Operating fund spending: 51.9%

    Net increase in General Fund spending over inflation and population growth, last 10 years: 24.2%

    Is Kirk Cox paying attention?

  2. How could this be? Every Democratic Party officeholder that I’ve heard speak in the last 10 years promised that Medicaid expansion would reduce state spending on health care. Just like Obama promised “If you like your doctor, you can keep your doctor.” And you will save money too.

    Good thing the Democrats have their MSM whores to hide this information.

    • http://jlarc.virginia.gov/state-spending.asp

      Actually, these trends have been tracked for decades now. See link. The reports started before 2009 as I recall. I wrote stories about the growth of Medicaid, employee health costs, mental hospital costs, etc. for the Roanoke Times 35 years ago. I wrote political rhetoric about it for years after that, attacking or defending, depending….. Everybody thinks it terrible until the choice is getting your family member on Medicaid or paying their bills yourself….then the applications flow in…

    • Pay careful attention… no one, not Democrat, not Republican, no Governor, no President ever said that Medicaid expansion, Obamacare, any reform measures would reduce healthcare spending.

      It’s reducing the RATE of healthcare spending. The additional benefit, if any, is auditable spending and better individual outcomes.

      That’s it. That’s all. Period.

      The proof of success or failure is found in looking at the differences between States that immediately expanded Medicaid, those that delayed, and those that have not.

      • ACA – AFFORDABLE Care Act – not Lower Cost Care Act!

        Most other developed nations cover ALL of their people for LESS than we spend to not cover everyone AND they live longer and really it’s no mystery if everyone has healthcare with regular doctor visits and disease and life-threatening conditions are screened for and detected and treated BEFORE they advance undetected to late stage where treatment costs are way more expensive.

        But we keep getting articles from Conservatives and skeptics about how costs have not gone down and implying that if they have not, it means the Medicaid Expansion and the ACA are failed experiments or some such, we need to repeal, and find another way.

        Mind you, it’s always repeal first and look for an alternative rather than look for an alternative, better way, THEN repeal.

        In terms of the “equity” issue with regard to schools, police, and other, the mother of all equity issues is actually health care and progress has been made but naysayers would repeal it in a heartbeat if they could and without any alternative other than “free markets’.

      • Glad you have the ability to have been at every meeting that I’ve attended. I was told at several meetings that expanding Medicare would enable the Commonwealth to cut state spending on indigent care and move money to other programs. Maybe, the elected officials were confused or just making empty and false promises to sway the attendees to support Medicaid expansion.

        And sorry, Larry, then Senator Obama said: “n an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year. And we’ll do it by investing in disease prevention, not just disease management; by investing in a paperless health care system to reduce administrative costs; and by covering every single American and making sure that they can take their health care with them if they lose their job. We’ll also reduce costs for business and their workers by picking up the tab for some of the most expensive illnesses. And we won’t do all this twenty years from now, or ten years from now. We’ll do it by the end of my first term as President of the United States.” Bristol, VA June 5, 2008. Available at https://justfacts.votesmart.org/public-statement/346763/remarks-of-senator-barack-obama-health-care-town-hall/#.UqtV5sRDt8E

        That was a fricking lie. But since it came from a Democrat, it doesn’t count.

        • “Maybe, the elected officials were confused or just making empty and false promises to sway the attendees to support Medicaid expansion.”

          You have your answer.

          Anyone seriously involved in this knows it is the rate. Any actual cost reductions mentioned are one-time.

          • But since it’s just a lie from Obama and his ilk, it doesn’t count. Just ask American journalists.

            The ACA was and continues to be premised on lies.

          • Not a lie, a promise broken. Has Trump given us the best health insurance ever?

            Has the GOP delivered a “Replace” for the ACA?

            Nope.

  3. Remember the work requirements?
    Poof
    Drink,smoke no deductibles !

    • There is a 50% premium increase for the use of a tobacco product within 6 months.

      Drinking? Yeah, still an issue, but “take a little cigarette for thy lungs sake” ain’t in the Bible…

  4. ” Hospitals’ uncompensated health care costs, which fell significantly as the Affordable Care Act’s (ACA) major coverage expansions took effect, rose slightly in 2017 but remained well below their 2013 level, according to the latest data from the Medicaid and CHIP Payment and Access Commission — especially in states that adopted the ACA’s Medicaid expansion to low-income adults.

    As a share of hospital operating expenses, uncompensated care costs in 2017 were 26 percent lower than in 2013, equating to more than $14 billion in savings in 2017 alone. While uncompensated care costs fell in all states, they fell much more in Medicaid expansion states: by 45 percent, on average, compared to 2 percent in non-expansion states (see table). Expansion states also saw much bigger gains in health coverage.”

    https://www.cbpp.org/blog/uncompensated-care-costs-well-down-in-aca-medicaid-expansion-states

    Never really understood the “keep your doctor” claim because the ACA and Medicaid Expansion were for people who did not have doctors.

    In terms of subsidies, people who have employer-provided are also heavily subsidzed, in fact it’s the biggest tax expenditure in the Federal and State budgets but it’s never explicitly represented that way.

    And folks who have employer-provided do not have to pay higher premiums either if they are fat or smoke or have other bad habits. Government rules requires that everyone young or old , healthy or sick pretty much pay the same premiums AND they are guaranteed the right to get the insurance, cannot be turned down.

    • That was a stupid sound bite on Obama’s part, or rather some idiot who wrote it and never understood how private insurance works, but saying:

      “If your insurance company likes your doctor, you can keep your doctor. If you like your doctor, and your insurance company doesn’t, then (and this is the NEW stuff), you can change insurance companies, unless your insurance is supplied by your employer in which case you’re screwed because your employer is interested only in his bottom line and will buy the cheapest insurance possible and you have no say, but you can use your FSA to pay your share of the premium tax-free. Oh, and find a new doctor… Now let me explain HMOs….”

      just don’t sound as sexy.

    • Larry, stop the “misstatements” about age and premiums for employer-provided health care. Federal law permits an employer to charge an older employee more for health insurance so long as the company pays the same percentage of the total premiums for everyone. For example, let’s assume the monthly premium for a 20-s0mething is $1000 per month and $2000 per month for a worker in his 60s. The employer can lawfully pay 50% of each employees premium, $500 and $1000 respectively, and be in compliance with the law.

      • TMT – you have Federal Health Insurance. Right? Do they charge you more per your age?

        Also, Guaranteed Issue. Can you be turned down for health insurance by your employer if they offer health insurance to employees? Can they refuse to offer it to you if you incur a lot of expenses more than others?

        Finally, aren’t you allowed to purchase healthinsuance with untaxed money? It’s not taxed by FICA, Federal or State and that amounts to about 40% of the cost of the insurance.

        You get all of this as an employee in a company or institution that offers health insurance. Folks who work for companies that don’t , get what?

  5. There is no question that Medicaid is a major driver of Virginia’s budget. But, as Steve Haner has pointed out, this has been the situation for a long time.

    This situation is not unique to Virginia and it is the result of factors outside the control of the state. As shown in the graph below, the growth in the cost of medical care has consistently outpaced the growth of all other sectors of the American GDP:

    That is a far bigger problem that the country has yet to deal with.

    • Good Chart.

      At least some of the cost escalation is pretty simple. It costs money to keep people alive longer.

      The lifespan of those who do not have health insurance, including those who are now getting Medicaid but did not get it before – was shorter.

      It’s not only keeping people alive longer near the end , it’s the cost of regular care, screening , finding disease, and then treating it before it kills you – like Diabetes. That costs money.

      Yet sometimes, we argue that those without health insurance – “deserve” it because they weren’t successful enough in life to afford it or get a job that provided it.

    • What I see in the chart is that prior to the Recession, the year over year was running at ~4%. The Recession knocked it down, Obamacare knocked it down again, and the pandemic is going to blow the roof of it.

      Oh well.

  6. In a somewhat related vein – where there are discussion where economic development takes place urban or rural or in-between, and look at where Moderna is releasing it’s covid vaccine: Olive Branch, Miss.

    Never heard of it!

    Go look where!

  7. We can decrease Medicaid costs in a major way with better access for the poor to primary care.

    The bill that I wrote and was introduced into the House of Delegates last year proposed Health Enterprise Zones to drive down Medicaid costs significantly, like it did in Maryland.

    It was a simple, proven solution that offered to both save a ton of money by dealing with chronic conditions before they required hospitalization.

    Virginia’s hospital lobbyists were against it, so it lost.

    When Medicaid was expanded, so were the reimbursements. That was the package that got the hospitals to volunteer to help pay for it. It is estimated that they cleared an extra $2 billion a year net of their “generosity”.

    As long as the hospitals rule everything that is done on health care in Virginia, the costs will go up faster than otherwise.

    Work rules for Medicaid recipients able to work would also help address costs, but our Democratic governance won’t permit it.

    So there are ways to slow the increase, but not in Richmond.

    • But isn’t expansion to primary care outside the hospitals and more with respect to providers?

      Virginia has moved Medicaid to managed care and that will help but it will take time to see results because chronic conditions are longer term issues.

      In terms of Medicaid spending by purpose – this is an interesting chart in terms of primary care for younger adults.

      • The problem in poor areas of the state is that primary care physicians do not choose to locate their practices there in high enough numbers to serve the populations. The federal government funds some clinics, but they do not cover the need. Health Enterprise Zones are public-private initiatives to incentivize more physicians to open their offices in poor areas.

        And I hate to point out that half of Virginia’s Medicaid Managed Care patients are managed by Optima and Virginia Premier – subsidiaries of, wait for it – Sentara. Welcome to Virginia.

        • Definitely a problem… monopoly owning monopolies. Fortunately, it is isolated to places of smaller populations. Not that it’s not a problem. But the regional monopoly owning the insurers is a psycho arguing in the mirror when it comes to negotiating costs.

          But to see where it could go, look at Luxotica(sp). They own the largest vision centers, e.g. Pearl, most of the glasses producers, Ray Ban, etc., and the vision insurance companies… so much for anti-trust.

        • I would think the state, without any objections from hospitals, could incentivize primary care in rural areas by offering to pay off their student loans or other incentives.

          Why would the hospitals be opposed to that?

          • That makes sense. Pay off loans on a year-by-year basis to create a stronger economic incentive to practice medicine in rural areas.

          • The “state” would be opposed to it because the hospitals are opposed to it. They don’t want admissions to drop off.

            Your suggestion would require legislation. It would fail for the same reasons Health Enterprise Zones lost.

            That bill also incentivized primary care physicians, not just to operate in rural areas but also in inner cities. You would have thought the vote to approve would have been unanimous since it would have been a major net plus for the budget while improving medical care for the poor. Wrong.

            Virginia hospitals could muster a majority in the GA and governors mansion to block a cure for cancer.

  8. James Wyatt Whitehead V

    It is just going to get worse now that the boomers are high mileage. An endless deluge of busted radiators bad timing chains, leaking brake hoses, and loose lug nuts. Heaven forbid a thrown crank bearing.

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