by James A. Bacon
Having expanded Medicaid coverage for more than 325,000 Virginians, Governor Ralph Northam now has issued an executive order directing actions to increase the number of Virginians enrolled in “quality, affordable health care coverage.” Secretary of Health and Human Resources Daniel Carey will explore ways to expand Medicaid enrollment, reduce insurance premiums, increase transparency of insurance choices, and develop a “data-driven strategy to create efficiencies in coverage and improve outcomes” with a special focus on “vulnerable” populations.
We won’t know what these initiatives will cost the non-vulnerable (the vast majority of Virginians) until we see the proposals. But as Carey undertakes his inquiries, he and the Governor would be well advised to remember how much health care in the form of Medicaid is already costing the state.
State General Fund spending on Medicaid services has increased from $2.29 billion in Fiscal 2010 to $4.88 billion in Fiscal 2019, according to a recent update on state spending by the Joint Legislative Audit and Review Commission. That was an annual growth rate of 9% yearly, and it accounted for 39% of the growth of all General Fund spending, crowding out other priorities.
Meanwhile, the Kaiser Family Foundation has found that the average cost of employer-provided family health care coverage now exceeds $20,000 a year, with workers paying slightly more than $6,000. That’s a 5% increase from last year — and it doesn’t take into account steadily rising deductibles and co-pays. Middle-class Virginia households are caught in a triple whammy — supporting ever-inflating Medicaid costs, paying more for their own insurance, and paying more out-of-pocket.
Here’s a question I’ve never heard Gov. Northam ask (he certainly doesn’t address it in his new executive order): How come medical insurance costs for employed middle-class Americans increase so much year after year… after year… after year?
Yeah, yeah, I know pharmaceutical costs are going through the roof. Except they’re not, actually. Prescription spending actually fell 0.3% in 2017, according to the Peterson-Kaiser Health System Tracker. Peterson-Kaiser was expecting a 2.4% increase in 2018 and 3.7% increase in 2019. Yeah, yeah, I know, the population is getting older, and old people have higher medical bills. Except that’s not relevant because old people (65 and over) get Medicare. Well, then, the workforce is getting older. Sure. The average age increased from 41.2 years in 2008 to a whopping 41.9 years in 20018, according to the Bureau of Labor Statistics. Maybe that’s a factor but it’s a tiny one.
How about cost shifting? Do doctors and hospitals charge patients with private insurance plans more than they charge Medicare and Medicaid patients? More to the point, are they charging private-pay patients more in order to cover losses on Medicare and Medicaid patients? Apparently the academic evidence on that is mixed and controversial. But it might be worth digging to the bottom of that question in Virginia.
If cost shifting is not a driver of higher private-pay insurance, what is pushing medical costs higher? How about looking into that?
Why are administrative costs so high, and what can be done about it? How about looking into that?
Why are hospital profits so high? Are they justified? And how are hospitals re-investing those profits? How about looking into that?
How does health care in Virginia’s benchmark against other states for productivity, outcomes, and innovation? How about looking into that?
Instead of focusing mainly on poor Virginians, how about dealing with health care issues affecting all Virginians, including the “vulnerable” and those who happen to be pay the taxes and pay their own insurance premiums? That would be a refreshing change.
