SD18 - Health Care for All Virginians--Interim Report
Executive Summary: The rising cost of health care is one of the most intractable problems facing the Commonwealth. A significant part of this problem is the need to provide health care for the approximately 880,000 Virginians who do not have health insurance of any kind from any source -- public or private. Many of these persons are employed and have incomes in excess of the poverty level. For most of these Virginians health insurance is s imply not affordable. Many others have incomes below the poverty line, but above the eligibility levels which restrict Medicaid and other public programs. Hospital care for those without any health insurance (public or private) is an increasing financial burden on Virginia's hospitals. At the same time the changing environment of hospital finance has raised new questions about the appropriate role of state government in regulating the supply of hospital beds, equipment and services. Virginia's Certificate of Public Need program was originally intended to control costs, but recent evidence suggests carefully designed reimbursement systems may be more effective in this regard. A Public-Private Partnership These and other problems associated with health care financing are in the final analysis societal problems which affect all Virginians, and not just one industry. Likewise, solutions to these problems will involve actions by the business community and by health care providers as well as additional public financing. A joint public and private partnership is needed to enable all parties to share in the responsibility for addressing the rising cost of health care. A Trust Fund for Indigent Health Care. As a first step, the joint subcommittee proposes that this partnership take the form of a new trust fund for indigent health care, administered by the Department of Medical Assistance Services. As a measure of our good faith in trying to solve these problems, we suggest the General Fund contribute one half of the funds the first year ($7.5 million). For fiscal year 1990, we expect the trust fund will provide about $15 million to be distributed to those hospitals which provide greater than a standard level of charity care. A portion of our General Fund contribution will be directed to those hospitals which provide an extraordinary level of charity care. Payments to the remaining hospitals will be supported equally by hospital contributions and the General Fund. The portion of the trust fund provided by hospitals will be in the form of contributions from those hospitals which provide less than the standard level of charity care. We propose a sunset clause for the trust fund to expire after the first year, so that we may consider further steps and modifications, as needed, during the second phase of this study. State-Local Hospitalization. We also propose steps, as recommended by JLARC in 1988, to strengthen the State-Local Hospitalization program (at a cost of $4 million in General Funds). This program, also to be administered by the Department of Medical Assistance Services, will become our payer of first resort for those Virginians who have no health insurance of any type, and whose incomes fall below the poverty level. When state and local allocations for this program are exhausted, then the trust fund will be available as a backstop. Deregulation of Hospitals. We believe that this new partnership should proceed hand in hand with legislation to eliminate regulation of hospitals under the Certificate of Public Need program, with certain exceptions. We suggest that psychiatric and rehabilitation hospital beds continue to be under COPN pending further study and that no hospital beds be converted to nursing home beds during the moratorium. We recommend that hospitals submit consolidated audits each year to the Virginia Health services Cost Review Council. These audits should include hospital affiliates, so we can be assured that public monies are being distributed in a fair and equitable manner. The joint subcommittee reiterates that this is only a first step. We recommend that during the second phase of our study we continue to review this situation to determine whether additional contributions will be needed. Health Insurance In addition to these steps to provide hospital care for those Virginians whose family incomes fall below the poverty level, we believe additional steps are needed to make health insurance more affordable. The joint subcommittee notes the disturbing estimate that 880,000 Virginians have no health insurance from any source, either public or private. While hospital insurance is available to anyone who wishes to purchase a policy, it is simply not affordable for many working families. One factor which contributes to the rising cost of health insurance is the inclusion of mandated benefits and providers in state laws governing such insurance. The joint subcommittee recommends a one year moratorium on the consideration of any further mandated benefits or providers so that further study may be conducted of the social and financial impact of these mandates. The Bureau of Insurance of the State Corporation Commission should assist in this effort. The second phase of our study should also include consideration of other cost containment initiatives and incentives to make health insurance more affordable. Long Term Care We recognize that in the future we will need more nursing home beds and other long term care services to meet the needs of our rapidly growing elderly population. For now, we recommend the moratorium on approval of new nursing home beds be continued until January 1, 1991 and that no applications be filed until the end of the moratorium. At the same time, we recommend that nursing homes come under the prospective budget review system of the Health Services Cost Review Council. We also recommend further steps to improve the availability and coordination of home and community-based services to enable more of our elderly citizens to continue to live in their own homes. Medicaid The cost of Medicaid is rising quickly. In fiscal year 1988 Medicaid expenditures from all funds were $806 million. Our projections indicate that by 1994 the cost of Medicaid will exceed $1.5 billion. Medicaid will soon represent the 1argest single expenditure in the state budget. As costs have risen, the role of Medicaid has been transformed since its creation in 1965. What was originally intended to be a medical care program for poor families and children who met traditional welfare-related definitions, has been transformed into a program which is now the single most important funding stream for long term care for the elderly and disabled, due to the tremendous impact of long term care costs on family resources. Reimbursement Concerns. We recognize that Virginia's eligibility standards for Medicaid are low in comparison to many other states. However, before any options to expand eligibility are adopted, certain under lying weaknesses in our reimbursement policies must be addressed. These weaknesses relate primarily to hospitals, nursing homes, and physicians. We recommend that Medicaid reimbursement for hospitals and nursing homes be enhanced by the inclusion of a new Virginia-specific forecast of inflation for fiscal 1990, to recognize the fact that nursing salaries are rising faster in Virginia than in the nation as a whole. This new inflation factor will cost $2.4 million (GF). In recent years our physician reimbursement under Medicaid has fallen far behind. In fact, some of our fees are now as low as the fifth percentile. Even those fees we recently raised to the 25th percentile have now fallen behind. In order to correct this situation, we recommend that Medicaid physician fees be increased to the 25th percentile over the next three years, with the first step to the 15th percentile as of January 1, 1990, at a cost of $6.0 million (GF). In addition to raising physician reimbursement, we must consider further strategies to make primary health care more available. The Board and Department of Health should continue to take the lead in this area, and prepare to make specific recommendations during the second phase of this study. Conclusion The estimated cost of this series of recommendations in fiscal year 1990 to the General Fund of the Commonwealth will be in the range of $20 million. Finally, we recommend that a Joint Resolution be adopted to continue the Joint Subcommittee on Health Care For All Virginians, with a final report to the presented to the 1991General Assembly. |
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