Tom Sgouros: Health Care Costs are the Real Crisis
Monday, December 05, 2011
This is not another article about pensions. You know why? It's not because I tire of the idiocy of the pension accounting practices at the root of our "crisis", but because it's time to give more attention to the real crisis facing government budgets, not to mention private businesses and households: health care costs.
The biggest story of government budgets over the past decade in Rhode Island is the escalating cost of health care. That's not surprising because it's one of the biggest economic stories around, even after the financial meltdown of 2008, but it doesn't go away, so who wants to keep reading the same thing over and over again? (And who wants to write it?) But it's time to revisit the story because the health coverage "exchanges" are in the news.
To recap: Governor Chafee has created by executive order what the legislature couldn't manage to create via legislation earlier this year. This is a commission to design the health insurance exchanges mandated by the President's 2009 health care reform bill. Rhode Island's early establishment of the exchange got us $58 million in federal grants to design and operate the thing. He's being sued for that by Rhode Island Right To Life and 28 members of the General Assembly, but is holding his ground.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTSo first, why didn't the Assembly manage to pass a bill? Because anti-abortion legislators in the state Senate attached amendments to the bill that essentially would have prohibited abortion from being covered by almost all private insurance in Rhode Island. The House declined to pass this legislation and the Senate declined to reconsider it, and that's where it stood at the end of the session in June.
What does health care cost us?
Second, let's get some perspective on health care costs in Rhode Island. Extrapolating from national statistics (courtesy the CMS), Rhode Islanders spent about $8.8 billion on health care in 2010. Of that number, about $1.4 billion came out of state and local government budgets. This counts the state share of Medicaid, as well as employee benefits, the expenses of running state hospitals, and all the rest. State and local tax and fee revenues (i.e. everything that doesn't come from the federal government) totaled $7.3 billion in FY10, so health care is about 19% of that.
In other words, about one dollar of taxes in every five you pay to the state and the town you live in goes to health care in some form or another. This is a huge number and up a lot since I started looking at budgets in the 1980s. I don't have comparable numbers back as far as that, but health care cost inflation has been between three and eight points higher than inflation for everything else since at least 1970. Last year, overall health care spending was up only 4% over the previous year, a record low, but the items that state and local budgets are spent on were up 5.2%.
Here's another way to get some perspective. The state pension fund sent out $790 million in checks to retirees in the last fiscal year. This year that is projected to rise to $817 million, an increase of 3.4%. That rate is expected to remain constant for the next decade, and then decline. This set of conditions was enough to provoke a cry of "crisis" and the Assembly obediently overturned decades of precedent in order to stiff our state employees and teachers of benefits they thought they had already earned.
Contrast this with health care where last year we spent over 70% more on expenses that went up over 50% faster in the slowest year on record. Since the President and Congress included very little in the way of realistic cost controls, there is little hope of lower inflation in the near future. (Not that there are any Republicans talking about realistic cost controls at all, but that's a different column.)
Health care as a bargaining chip
Faced with that kind of crisis in government spending, affecting both state and municipal budgets, a substantial number of legislators, including Senate President Teresa Paiva-Weed, saw the exchange legislation as an opportunity not just to preserve restrictions on government funding of abortion -- something that had been hashed out in the federal bill -- but to advance them to forbid anyone's insurance from paying for one if that coverage was acquired through the exchange at all. Not only that, they refused to back down, endangering what turned out to be $58 million in federal funding.
Remember, there has been a compromise in place for many years over abortion and government funding. I and many others think the restriction in place is an intrusion into medical choices that is unnecessary, arbitrary, discriminatory against poor people, and largely motivated by the kinds of religious concerns clearly prohibited by the establishment clause of the First Amendment. But legislators who agree with me did not try to use the bill to upset this compromise. Legislators who disagree did exactly that.
Abortion is a prickly emotional issue, and it makes some sense that some people feel strongly enough about restricting other people's access to it that they'd risk a fiscal trainwreck of their state and all its cities and towns to make that point. I disagree with them, but I don't doubt their fervor. But I do think it important that we all know who they are, so here's a list:
Representatives: Jon Brien, D-Woonsocket Samuel Azzinaro, D-Westerly Michael Chippendale, R-Coventry, Foster, Glocester Arthur Corvese, D-North Providence Doreen Costa, R-North Kingstown John Edwards, D-Tiverton Deborah Fellela, D-Johnston Raymond Hull, D-Providence Karen Macbeth, D-Cumberland Jan Malik, D-Warren James McLaughlin, D-Central Falls Rene Menard, D-Lincoln Jared Nunes, D-Coventry Brian Newberry, R-North Smithfield Peter Palumbo, D-Cranston Robert Phillips, D-Woonsocket Daniel Reilly, R-Portsmouth Gregory Schadone, D-North Providence Scott Slater, D-Providence and Joseph Trillo, R-Warwick.
Senators: Louis DiPalma, D-Little Compton, Middletown Frank Ciccone, D-Providence Marc Cote, D-North Smithfield Walter Felag, D-Tiverton, Warren Nicholas Kettle, R-Coventry, Foster, Scituate Harold Metts, D-Providence Glenford Shibley, R-East Greenwich and William Walaska, D-Warwick.
Tom Sgouros is the editor of the Rhode Island Policy Reporter, at whatcheer.net and the author of "Ten Things You Don't Know About Rhode Island." Contact him at [email protected].
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