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Home / Washington Business - March/April 2005 / Dick Davis Column: Lawmakers Face Tough Choices on Health Care |
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Dick Davis Column: Lawmakers Face Tough Choices on Health Care |
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Written On: March/April 2005 |
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Written By: By Richard S. Davis - President, Washington Research Council |
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As metastasizing health care costs consume the state budget, lawmakers face an uncomfortable dilemma: Control benefit levels or raise taxes. The former pits them against powerful interest groups; the latter won’t work.
Here’s the problem: In the current two-year budget, the state will spend about $5 billion on health care. Medicaid will cost $2.4 billion. Another $1.5 billion covers the employer’s share of state employee health insurance (including public school teachers). Then add the Basic Health Plan and children’s health insurance for another $1.2 billion.
Analysts project that all of these costs will rise in the budget now being written. Health care spending grows faster than the population, inflation, the economy, job creation, or ratings for the Fox News Channel.
Nationally, Medicaid’s a budget nightmare, with Washington a cost leader. The National Association of State Budget Officers found that Washington had the highest general fund per capita Medicaid spending in the West in 2003, $441 per person, reflecting our state’s broad eligibility standards and range of services. Alaska and California were second and third, $327 and $297 respectively.
An article last month in the McKinsey Quarterly estimated that by 2009 Medicaid would claim more than 75 percent of all new revenues in 10 states and cost 11 other states, including Washington, from 50 percent to 75 percent of new dollars. Such rapid growth crowds out other priorities. What’s spent on health care isn’t available for schools. A projected half-billion-dollar increase in Medicaid spending in the coming biennium consumes a third of forecast revenue growth.
Health Affairs summarized the usual techniques — benefit restrictions, cutting provider fees, premium increases and tighter administrative barriers — and found such tinkering really didn’t change things much. Medicaid’s constituencies lift it from “a poor-people’s program” to one with substantial political clout. Hospitals and doctors want higher reimbursements. Activists want to see more people covered. Alternative providers want to see more services paid for.
Here, Gov. Christine Gregoire swiftly reversed a modest requirement requiring a six-month review of Medicaid eligibility, returning to once-a-year verification. The change is expected to add $33 million to Medicaid costs, with the state paying about half the bill. The governor also postponed plans to collect premiums from Medicaid recipients. Both provisions were part of a legislative effort to control costs.
While Medicaid gets most of the attention, the state’s Health Services Account, which pays for services including the Basic Health Plan and children’s health care, routinely teeters on the brink of bankruptcy. A projected $550 million deficit in the account was filled last biennium by freezing enrollment, boosting premiums and co-pays, and using tobacco tax money earmarked for enrollment increases to maintain existing slots. These short-term measures cannot work for long.
To preserve services for the most vulnerable, lawmakers must follow the lead of those states that have trimmed benefit packages and tightened eligibility.
Even as health care services for low-income Washingtonians struggle, the state provides its employees uncommon benefits. The collective bargaining agreement negotiated last year increased the monthly employer share for health care benefits from $585 per employee in 2005, to $663 in 2006, and $744 in 2007. The agreement aims to keep the employee share of the cost at 12 percent, well below what is common in business. Public employee unions tenaciously protected the benefit and accepted relatively low wage increases to preserve it. For taxpayers, the tradeoff looks like a bad deal.
Despite the opposition of powerful interests, state government must control costs in low-income health care programs and in employee benefits. The alternative, raising taxes to extend current services, simply will not work. No area of public spending can long grow faster than the economy. There’s simply not enough money to continue current commitments. Tax hikes cannot sustain the unsustainable. They would damage the economy and fuel expectations that cannot be fulfilled.
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