Return to Virginia Business - November 2002

Should Health Care be a Priority for Virginia?
Many Believe Health is a Critical Public Issue

Related links:
— What is Medicaid?
— Confronted with Choices

Government policies and practices play a key role in the delivery of health care services in Virginia. But for years, Virginia’s General Assembly has focused much of its time on other issues, such as transportation, public safety and public education. Each is a worthy public priority to be sure.

A recent survey, however, suggests it is time for our legislature to accord an equal priority on legislation that promotes, not impedes, the constructive evolution of the state’s health care delivery system. Important state initiatives such as Virginia’s Medicaid program and the Family Access to Medical Insurance Security Plan (FAMIS) provide health care to children, the working poor and disabled. The decisions made in Richmond directly affect these programs and the health care coverage they provide to approximately 650,000 Virginia citizens. (616,816 Medicaid recipients, 31,952 FAMIS recipients.)
This number, combined with the more than 1 million Virginians who lack health insurance, shows that over 25 percent of our state’s residents lack health care coverage or need government assistance to obtain it.

Although these people may work full-time, a significant percentage of the uninsured live in households with annual incomes of less than $20,000 and are not eligible for state assistance. And inadequate income is only part of the problem. For some remote towns and inner cities, there are simply not enough primary care physicians to serve the population.

Health Care is a Top Issue among Voters
The debate over providing access to quality health care is not new. Discussion on implementation of a national health care program peaked in the early 1990s. Since then, state governments have continued to deal with the problem. Now there is evidence that Virginians are starting to focus on health care as well. In a recent survey of likely voters, health care affordability ranked as the second most important major issue facing Virginians. (See chart for a breakdown of final results.) The results demonstrate a thorough understanding by the public of the budget crisis facing Virginia and where health care fits into the equation.

The results in Virginia echo a recently completed poll by the Kaiser Family Foundation and Harvard’s Kennedy School of Government. One in five Americans named health care as one of the two most important issues for government to address. When asked to specifically name the most important health care issue our government should focus on, access to health care and insurance issues received the most mentions.
Surprisingly, Americans tend to favor improving the current system and are not eager for government to enact a complete overhaul. In fact, more than 75 percent of survey respondents said that even though changes are needed, the current system works pretty well.

Virginia’s Track Record on Health Care
Health care in Virginia reflects the benefits of private health care market forces such as innovation, individual freedoms and additional responsibility. But with a significant amount of funding for health care programs paid for by the government, it is also clear that intelligent state and federal policies are critical if excellence in health care is to be achieved. If they are properly conceived and implemented, public policies can advance quality protections, improve access, empower patients’ choice and improve public health. In a perfect world this would produce a win-win situation for all, but only if the environment for change is right. This is currently not the case. The state’s budget crisis, rising health care costs and an increase in those seeking services make it very difficult for members of the General Assembly to sustain current funding levels much less talk about expansion of program funding.

However, even in good economic times, Virginia has historically spent less on health care than most other states. In 1997 (the most recent data available), Virginia ranked 46th out of 51 states (including the District of Columbia) in personal health care expenditures as a percent of gross state product (GSP). In fact, Virginia has been substantially below the national average every year for more than two decades. It is important to note that this is not related to regional differences. Actually the Southeast region, of which Virginia is a part, exceeds the national average, as does the Mid-Atlantic region, which Virginia borders.

“There are a number of opportunities for matching federal funds that Virginia has never taken advantage of,” according to Katharine M. Webb, Senior Vice President at the Virginia Hospital & Healthcare Association. “And a host of other states have come up with creative ways to fund such vital programs as pre-natal care and pediatric care — two areas that will actually save the state money in the long run.” It is time for Virginia’s General Assembly to get creative. For example, the state should be taking advantage of a 2-for-1 match of federal dollars for mental health coverage under FAMIS. The change would allow children to have access to community-based mental health services, and these children would be treated before they end up in a crisis — possibly ending up in costlier programs in the juvenile justice system.

An example of one state’s creativity in enhancing existing health care services can be seen in Delaware where they undertook a feasibility study to coordinate, deliver and manage long-term care services in a more efficient and cost-effective way. This program would be patterned after the successful implementation of a similar program, called Diamond State Health Plan, adopted to manage acute care patients in the state.

Along with delivering services more effectively, the state also wanted to reduce the reliance on institutional care and promote community-based alternatives. Long-term institutionalization was very costly for the state and often inappropriate for the recipient. Unfortunately, the state lacked viable alternatives, which led it to explore other options.
Delaware’s ultimate plan addressed a comprehensive Medicaid managed long-term care model for the elderly and physically disabled, and a behavioral health managed care program for Medicaid and non-Medicaid eligible adults with severe health disorders and substance abuse. Delaware held town meetings around the state to educate communities and get feedback. After extensive research and constituent input, the plan was enacted and is currently awaiting federal approval and initial funding.

Virginia’s poor past performance in the area of health care will only exacerbate a growing problem that will ultimately affect all citizens. Baby Boomers are a massive segment of the state’s population and they are moving rapidly towards retirement age. As this segment grows older it will impose a greater burden on our state’s health care system. And given the increasing life span of the average American, this segment will become largely dependent on Medicaid as many outlive their retirement savings. (See related article on Medicaid.)
Unfortunately, these Baby Boomers will be forced to depend on a system short on staffing and woefully underfunded unless the legislature takes serious action to address this impending crisis.

Last year’s state budget included $18 million in direct cuts to hospital payments for services provided to Medicaid recipients — this cut was on top of the existing state under funding of hospital costs of care to Medicaid patients. In addition to direct cuts to hospital payments, managed care plans that participate in the Medicaid program were cut by $15 million, which has a flow-through effect on hospitals. Also, Medicaid payments to nursing homes were cut by $25 million, adding to their existing $84 million annually in under funding.

“Nursing facilities, for the most part, have only three sources of payment — Medicaid, Medicare and private paying patients. Few people currently in nursing facilities have long-term care insurance. For this reason, to make up for the Medicaid under funding, nursing facilities can only look to the private paying patient to subsidize the costs of care for the Medicaid patients. This amounts to a hidden tax on the private paying patients,” says Mary Lynne Bailey, vice president, legal and governmental affairs, Virginia Health Care Association.

The fact is, the state government can and does enact these unfair payment reductions because the ultimate burden is transferred directly to our health care system — the hospitals, physicians, nursing homes and pharmacists that continue to provide care to the uninsured and the indigent, whether they can pay for the services or not. In the year 2000, hospitals and health systems provided approximately $350 million in uncompensated care. In these challenging economic times it is easy to lose sight of the fact that hospitals have their doors open 24/7 to anyone in need.

Emergency departments are society’s last “safety net” and are both legally and morally obligated to help those in need. If the recipient is uninsured, then the ultimate cost is borne by the consumer and the business community in the form of higher service fees and higher insurance premiums. Restricting eligibility for programs such as Medicaid and continuing to underfund necessary medical care is a short-term solution with grave long-term effects.

With the state budget deficit approaching $2 billion, it would be too easy to dismiss the challenges inherent in funding needed health care programs — leaving the problems for the current system to somehow absorb or for some future generation to solve. The message from the public is that health care is critical and worthy of long-term strategic investment.

Return to Virginia Business - November 2002