Truth-tellers, liars and equivocators

The costs of health care reform: Maryland vs. Virginia

January 21, 2011 - 10:00 AM
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Last week, Virginia Gov. Bob McDonnell gave his second State of the Commonwealth address. The Republican took aim at a favorite conservative target, the health care overhaul passed by Congress.

“The federal health care mandate alone will cost Virginia about $2 billion by 2022,” he declared.

On Wednesday, it was time for Maryland Gov. Martin O’Malley, a Democrat, to be sworn in for the second time. His second-in-command, Lt. Gov. Anthony Brown, had a different opinion on the fiscal impact of health care reform. In his inaugural address, Brown said Maryland had developed a model for implementing reform “that will save Maryland $830 million … by 2020.”

A spokesman for Brown sourced the $830 million figure to the state’s Health Care Reform Coordinating Council, a reform panel that Brown chaired.  A spokesman for McDonnell attributed his figure to Virginia’s Department of Medical Assistance Services.

Both numbers come from reputable sources. Maryland and Virginia are different states, and Brown and McDonnell are using different years as their endpoints, but it’s hard not to see some contradiction between the two statements. One of them must be lying, right? Nope.

Turns out, the fiscal impact of the health care overhaul isn’t close to standard from state to state. A report from the National Association of State Budget Officers last year noted: “The net fiscal impact on states will vary depending on many factors including the number of newly eligible, the enrollment of those currently eligible though not enrolled, and the impact of the prescription drug rebates.”

If that explanation is a touch opaque, just think Medicaid. After all, most state spending on healthcare comes in the form of Medicaid, a federally subsidized program that provides health care for the poor and is a big and growing part of state budgets.

In fiscal 2009, states spent 21 percent of their total budgets on Medicaid. Different states have different standards for Medicaid eligibility, and the number of people covered and the amount spent can vary. According to statehealthfacts.org, a project of the Kaiser Family Foundation, Virginia and Maryland have disparate generosity levels when it comes to Medicaid payouts. 

Virginia will cover only adults who make less than one-third of the federal poverty level, while Maryland will cover only adults who make up to 116 percent of the poverty level---meaning that Maryland covers a larger percentage of its indigent residents for health payments. Virginia doesn’t cover childless adults, Maryland does. In 2007, Virginia ranked 48th in Medicaid spending per capita.

There are other differences between the two states' health care policies. Maryland, for example, was one of 35 states that operated a high-risk pool for health insurance that covered people who normally would not have been able to get insurance. This is expensive, but once insurance companies are no longer allowed to prevent people with pre-existing conditions in 2014, it’ll no longer be necessary.

“A lot of this stuff is very state-specific,” said Charles Milligan, the executive director of The Hilltop Institute, a group from the University of Maryland, Baltimore County that helped Brown's panel calculate the state's cost estimate. In the case of Maryland, Milligan said, health care reform actually imposes $1.85 billion in new costs over the next decade, but the savings wash those costs out. “A lot of those dollars are federal dollars replacing state dollars where Maryland had created a pretty strong safety net.”

Virginia’s costs mainly come from a required expansion of Medicaid. Virginia may need to add as many 400,000 more people to its Medicaid rolls as part of a required expansion of eligibility to 133 percent of the poverty line. While the federal government will pick up much of the tab for this, the costs are still high.

We were expecting a liar, but didn't find one. Both Brown and McDonnell receive a grade of Honest Abe.

Honest Abe
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