Rebecca Cook's Clips

July 22, 2000

State budget falling sick

By REBECCA COOK
Associated Press Writer

OLYMPIA -- State officials had a nickname for health care in the early 1990s: Pac-Man, because it gobbled up all the money in the budget.

Now Pac-Man is back with a vengeance.

Budget experts say skyrocketing health care costs will force them to feed quarters into this Pac-Man for years.

The state's health care costs are expected to grow by more than $ 800 million in the next two years. Despite the strong economy, the state just can't handle the growing expense. Health care alone is eating up half the spending growth allowed under voter-approved Initiative 601.

"When you've got health care costs increasing at 12 to 15 percent, and the growth factor in the spending lid is under 3 percent, you've obviously got a collision course," said Rep. Helen Sommers of Seattle, the Democrats' main budget writer in the House. "The impact of health care costs on the budget is enormous."

Burned by misadventures in universal health care during the 1990s, politicians are looking for incremental solutions for a mammoth problem.

"We're talking about it all the time," Sommers said. "But solutions - no."

Everyone suffers in some way when health care costs rise, from the kid in the underfunded school to the commuter in gridlock. Where is the state's money going? Health care.

Under Gov. Gary Locke's proposed budget, health insurance premiums for state workers would double in the next two years. He also proposes cutting some medical services, such as preventive dental and vision care for the poor.

"They are already having a hard time finding care," said Lynn Frandsen, who runs a University of Washington program that provides dental care to disabled adults. About half of the program's 1,200 low-income patients, who have problems such as Lou Gehrig's disease and Parkinson's, would lose dental benefits if the cuts in the governor's budget stand.

"They say, 'You're the only place we have to go,'" said Frandsen, director of education at the UW School of Dentistry. "They just can't believe it."

While issues like transportation and education receive more attention, health care costs are stretching the state budget to a breaking point. The government isn't the only one feeling pain. Businesses are under the same pressure to cut benefits, raise premiums, or watch profits disappear into the jaws of health care.

"They're sure trying to break me," said John Vipond, who provides health coverage for the 75 employees of his Puyallup-based wood pallet business. Until now, he's always offered coverage for families, too. But facing a 30 percent increase in health care costs, he doubts he'll be able to continue the practice.

"There goes more uninsured children and mothers," he sighed.

Between insurance for state employees and medical assistance for poor people, the state pays health care costs for more than 1 million people, according to Sue Crystal, administrator of the Health Care Authority.

The Department of Social and Health Services' medical costs are expected to increase by $ 588 million in the next two years, according to the Office of Financial Management. Every agency calculates the costs differently, so depending on which numbers are used, that's a jump of 15 to 30 percent.

Providing health coverage for state employees, including teachers, is expected to cost the state $ 213 million more in this two-year budget cycle. That's an increase of 13 percent, although the cost of prescription drugs for some groups is growing at a rate of 30 percent.

By contrast, the Consumer Price Index, a measure of inflation for Seattle, Tacoma and Bremerton, was 4.1 percent in December.

Sen. Lisa Brown (D-Spokane), the Senate's main budget writer, looks at the $ 213 million cost increase for state employees' health care and sees missed opportunities.

"That's $ 200 million that's not available for salary increases, not available for reducing caseloads, not available for creating another spot in a university, not available for cleaning up a stream for salmon," Brown said.

Many factors drive health care costs, but experts agree prescription drug prices are the biggest.

"The increase in drug costs has far outpaced the increase in health care costs," said Jeff Robertson, chief medical officer of Regence BlueShield, which has about 1 million Washington state customers.

Other factors are the growing health needs of aging baby boomers; expensive technological advances; increased options and consumer demands; and government mandates like required contraceptive coverage, experts say.

It's deja vu for Washington state and the rest of the country. Double-digit health care inflation dominated the early 1990s and caused nationwide hand-wringing.

President Clinton's plan for universal health care, introduced in 1993, never gained support and went down as one of the biggest policy failures of his administration.

Washington state leaders gamely tried to fix the problem, too. In 1993, the Legislature passed a major overhaul of the state's health care system. But without national reforms to support it, the legislation had mixed results. The Legislature has spent the last seven years undoing the 1993 reforms, at times bitterly.

Despite political setbacks, costs did fall in the mid-1990s. That was the golden age of managed care, which controlled costs by running health care like a business and cutting down on unnecessary tests, treatments and hospital stays.

It worked, for a while.

"We don't see people staying in the hospital longer than they need to be. Things have changed," Robertson said.

But those were one-time cost savings. The fat has been plucked out of the health care system; any cuts now will scrape the bone.

By the numbers, health care cost increases in 2001 look a lot like 1993. But one important thing is different; this time, no one has easy answers.

"There is no magic bullet," said Crystal, who will lead the governor's newly formed Health Care Sub-Cabinet, charged with coordinating health care policy.

State and national politicians shy away from proposing bold, comprehensive solutions. They did that in 1993, and a lot of them got burned.

State Sens. Rosa Franklin (D-Tacoma) and Pat Thibaudeau (D-Seattle) have proposed legislation to try to make prescription drugs more affordable. Incremental steps like prescription legislation probably will prevail over sweeping changes, Crystal said, because that's what people want.

While most Americans support health care reform, Crystal said, they're also personally satisfied with their own doctor and health plan.

"Taking the entire system and turning it on its head and dumping it upside down is not going to be the solution to this problem," Crystal said. "We're going to have to at least start the discussion about what to do about this."

SIDEBAR: Reasons behind skyrocketing health care costs

Why are health care costs rising so rapidly? An explanation of some of the reasons:

Prescription drugs. At the Department of Social and Health Services' Medical Administration, prescription drug costs are growing 15 percent a year, compared with 5 percent growth in payments to doctors and 7.5 percent growth in hospital expenditures, according to deputy assistant secretary Tom Bedell.

Pharmaceutical companies say the high costs of prescription drugs pay for the extensive research that goes into creating lifesaving medications.

"You're not dealing with people taking drugs that are unnecessary," Health Care Authority Administrator Sue Crystal said. Indeed, the expensive wonder drugs may pay off later with reduced hospital and surgery costs, she said. "But that doesn't help in the short run."
Technology. Just as prescription drugs have become better and more expensive, so has technology. The array of new tests, equipment and procedures available improves patient care, but it all costs money.
Demographics. The baby boomers are getting older, and they need more health care. "As boomers, we're culturally entitled to getting what we want and getting it now," said Regence BlueShield chief medical officer Jeff Robertson.
The Internet. Patients are better informed consumers than ever before, thanks to their research on the Web. But informed consumers are often demanding consumers, and that drives up costs.
Government mandates. When the state or federal government orders health plans to pay for contraceptives or maternity care, somebody pays.

"Every additional benefit has a cost," Robertson said. "I'm not saying it's good or bad, but they do."

SIDEBAR: Facts and figures about health care in the state budget

Health care in the state budget, by the numbers:

$ 801 million: Total increase in health care costs to the state for the 2001-2003 budget.
Cost of K-12 employees health coverage in 1999-01: $ 792 million.
Cost of K-12 employees health coverage in 2001-2003: $ 934 million.
Increase in K-12 employees health costs: 18 percent.
Cost of higher education employees health coverage in 1999-01: $ 208 million.
Cost of higher education employees health coverage in 2001-03: $ 236 million.
Increase in higher education employees health costs: 13 percent.
Cost of other state employees health coverage in 1999-01: $ 515 million.
Cost of other state employees health coverage in 2001-03: $ 547 million.
Increase in other state employees health costs: 6 percent.

Source: Office of Financial Management