Household incomes stagnated in Virginia while the number of uninsured increased during the past economic cycle, contends the Commonwealth Institute for Fiscal Analysis in a recent report, “Feeling the Pinch: The State of Working Virginia.” (I came across the report after reading about it in today’s Washington Post.)
“Despite seeing incomes rise this year, more Virginians are falling into poverty and fewer are able to afford health insurance,” said Michael Cassidy, executive director of the Commonwealth Institute, in an earlier press release based on the latest Census data. “This demonstrates how the bottom has fallen out for low income workers in the state’s economy — their wages have tanked in recent years — and the benefits like life insurance coverage that go along with most jobs have vanished.”
Cassidy doesn’t touch upon it, but there is a direct connection between stagnant wages and the rising rate of uninsurance. It’s the soaring cost of providing medical insurance coverage. Spending more on medical insurance leaves less for employers to pay in higher wages. The common thread: out-of-control costs in the health care sector.
Cassidy brushes up against the problem, but never quite grasps it. Health care coverage is declining mainly in the private sector, he writes. “According to Census data, 69.4 percent of Virginians received coverage from any private insurance plan in 2007. … Since 2000, the private insurance rate has fallen 6.2 percent.” Of those workers who do have insurance, Cassidy notes, they pay the highest share in the country: about 24 percent of the cost, compared to 19 percent nationally.
Cassidy emphasizes the role of public programs in offsetting the decline of private insurance. But a fundamental question needs to be asked: Why is health care insurance in Virginia so darned unaffordable? There are many reasons, but the most important the success of medical interest groups — primarily hospitals and professional societies — in lobbying the General Assembly to protect their interests at the expense of the general public. Examples include:
Mandated insurance benefits. Virginia has among the highest number of insurance mandates of any state in the country. For businesses too small to self-insure, the only option is to buy a plan subject to mandated benefits. These mandates prohibit insurers from offering less expensive, “bare bones” policies that small employers can afford. The all-too-frequent result: No health insurance at all.
The cartelization of the health care industry. Quasi monopolies under the guise of “health care systems” — Carilion in western Virginia, Inova in Northern Virginia, and Sentara in Hampton Roads — dominate Virginia’s health care system. These cartels are protected by the Certificate of Public Need that severely restricts competition from newcomers that would force a much-needed restructuring and re-engineering of the health care industry. (See “Big Questions for Roanoke’s Carilion” and “How Much Profit at Carilion Is Too Much?”)
The craft unionization of the health care workforce. All of the health care professions are certified and licensed. They carve out professional turf and use state law to ensure that other professions cannot infringe upon it. This legally sanctioned craft unionization makes it difficult to re-engineer hospitals to make their processes more efficient.
The employer-based health care insurance system is a mess, as are the government-administered Medicare and Medicaid programs. Private insurance is bloated with layers of unnecessary administrative overhead. Medicare and Medicaid are riddled with fraud. Both need to be fixed. But the root problem is the lack of business innovation in the health care sector, the resulting lag in labor productivity and the difficulty in improving patient outcomes. Until we address these ground-level problems — rooted in a political economy in which health care providers manipulate the political system to their advantage — most debate about health care “reform” in this country is a waste of time.
I’ve touched on only a small piece of what the Commonwealth Institute report covers. As I’ve said about institute’s studies in the past, I often take issue with the findings and implications of the findings. But I do applaud the group for raising important issues of social equity and supporting them with facts, rather than spewing a lot of unsubstantiated rhetoric. The Commonwealth Institute raises the bar of public discourse, and for that it should be commended.
