Tag Archives: Stephen D. Haner

State Budget Bacon Bits: Reserves and R&D

And now for the some other interesting elements of Virginia’s new $117 billion two-year state budget, because Medicaid expansion sucked all the wind out of the room (understandably.)  The House Appropriations Committee added this summary presentation yesterday while the Senate members were filling up their Facebook and Twitter accounts with Riveting Speeches before delivering votes everybody expected.

Reserve Funds.  By the end of the 2020 fiscal year, 25 months from now, the projection is for just under $1 billion split between the traditional Rainy Day Fund and the more flexible reserve fund.  To fatten the projected balances, intended to placate Wall Street analysts getting antsy about the state, some scheduled deposits into a water quality fund may be held back.

The Rainy Day Fund is controlled by constitutional provisions and can only be tapped when revenue projections fall short.  The revenue reserve is simply an exercise in legislative and executive discipline but I think is there to protect the state if expenses exceed projections.  It is a subtle point but perhaps important because of hard to predict programs (such as, drum roll, Medicaid expansion.)

R&D Taxes.  It has already been noted that the budget included language to create the hospital provider taxes funding the Medicaid expansion, bypassing the usual legislative process for considering tax bills.  There another tax change buried in there, this one creating a sales tax exemption for research and development expenses at federal facilities.  What I don’t see anywhere in the budget is a provision to capture the savings from eliminating the House Finance Committee, which is obviously now redundant.

The Lottery Is For Education!  Three decades in people still believe that their lottery losings are great for public education.  No, it supplants other tax dollars and does not supplement them. Losing tickets free up a sales tax or income tax dollar for something else.  Because this final bill is so late, lottery profits projections could be increased based on additional weeks of data and see how that is reported.

HAC Staff Note

Yes, the money is now packaged differently and state budgets now include the Supplemental Lottery Per Pupil Amount (PPA). This budget increases the PPA totals with great fanfare.  I remain unconvinced that public education funding would be different if the lottery disappeared, but lower priority items might suffer.  The irony of funding schools with a tax on the mathematically challenged marketed by pretending money isn’t fungible never ceases to amuse.

Teacher Raises.  There is money included to provide the state’s share – and that percentage is very low in some localities – of a 3 percent raise for local teachers.  The raise is not scheduled until the 2019-2020 school year and that may or may not be enough to keep the red shirt protesters away from Capitol Square in coming months.

The approved raise amount for state employees and other state-supported local employees is 2 percent, also scheduled for the summer of 2019, but there is an added two percent for state employees with three years of service.   A cynic might note that scheduling the raises for Year Two keeps the positive headline intact and delivers the raise before the 2019 election, but cuts the total cost in the budget substantially.

My Personal Favorite.  I loved the following bullet point: “$333,333 GF the first year and $381,600 GF the second year pursuant to HB 883/SB 20 establishing a three-year regulatory reduction pilot program (Dept. of Planning & Budget).” Next year we can figure how much it cost us per reduced regulation.

GTT.  I will be back on the blog in a week.  Might hit the Alamo again this time so the following quote came to mind.  We do plan to visit their Capitol.

Make The Next Round A Double

USS Gerald R Ford CVN 78 Christening 2013

Virginia leaders like to get up on their soapboxes and worry that Virginia is too dependent on defense spending and promise elaborate strategies to diversify the economy.  Be grateful in some places the focus remains on building more combat ships at Newport News Shipbuilding, keeping its 20,000 plus employees and thousands of suppliers and contractors fully engaged well into the future.

As the House and Senate in Washington inch toward a fiscal year 2019 defense budget, the House has offered a version that expands on the Trump Administration’s proposal by setting up a single order for two nuclear aircraft carriers.

USS New Mexico Crossing Hampton Roads

The Senate isn’t there yet.  CVN 80, the future U.S.S. Enterprise, is already in the early stages of construction but the main construction contract has not been signed.  The proposal is to contract for the unnamed CVN 81 at the same time.

Huntington Ingalls Industries, parent of the shipyard, claims that ordering two carriers at the same time would save the Navy $1.6 billion because it would allow more negotiating leverage with the supply chain and would keep the workforce steady state. While working there I heard it was ideal to start a new carrier every four or five years, but the gap between them recently has been more like seven years.  One result of that is a labor valley every so often.

Two carriers included in a single contract would still need to be built in sequence, since there remains only one dry dock and crane capable of accommodating the assembly process. But as Enterprise sailed out of Dry Dock 12, the pre-built sections of CVN 81 would be ready to start going in. Enterprise will be the replacement for the first-of-its-class U.S.S. Nimitz, CVN 68, aging into its 40s and nearing retirement.

The ship in the dry dock now is CVN 79, the future U.S.S. John F. Kennedy. She is about 80 percent structurally complete and her christening and launch date are coming up fast. Debate continues over the utility of the large deck nuclear carrier in this submarine and missile-infested world, but it remains one weapons platform that our rivals obviously covet but cannot yet duplicate.

There is more potential good news for Virginia in the House version of the defense plan. The Navy is now starting two Virginia Class submarines annually, splitting the work between Huntington Ingalls and General Dynamics, but the old Los Angeles Class boats are retiring fast. The House adds a third submarine start in 2022 and 2023 – which is also when construction of the first new ballistic missile submarine, the future U.S.S. Columbia, should be in full swing at both Newport News Shipbuilding and Electric Boat.

Finally in the mid-2020s the aforementioned U.S.S. Nimitz returns to the yard for decommissioning of her nuclear components. That’s a couple thousand more jobs, too. So diversify the economy, certainly, but as they say in politics: Don’t forget your base.

After watching the christening of the U.S.S. George Bush CVN 78 in October 2006 I was heading out on Warwick Boulevard and there was a protester with a sign saying the money should have been spent on jobs. That was one clueless ideologue.

Note:  Both attached images were by the excellent staff photographers at NNS.

Their Money is Bad and Our Money is Righteous

Money In Politics

During the 2018 session I received a curious meeting invitation, hush-hush, from somebody who indicated a possible alliance in the struggle against the pending utility legislation. We had to meet away from the Pocahontas Building to avoid observers.  My curiosity led me to take the meeting, and it turned out to be about the Clean Virginia effort which sparked a Washington Post story Friday.

As the person described back in the winter how they were planning to fight Dominion’s political clout by asking legislators to take a pledge against Dominion money, and in exchange replace those dollars with their own funds, my reaction was immediate: What is the difference? Aren’t you also assuming that all legislators care about is who gives them money? Aren’t you also trying to buy votes?

That was the counter attack to expect, and I wanted nothing to do with it. It would be detrimental to our efforts. I predicted it would blow up. It was a short meeting and forgotten until reading Blue Virginia Sunday reacting to the Post. (I cannot remember if the Feb. 8 Times-Dispatch story about this was before or after I had that meeting, but at that point the group had not begun its pitch.)

Emailing a cash donation offer to 140 publicly-funded legislative inboxes – as Clean Virginia apparently did recently — was an intentional invitation to media attention. They had to expect a story. The assertion by Blue Virginia that the new Post story was a Dominion-inspired hit piece (“fed to the stenographers”?) is just more evidence that for far too many clueless activists these days (all sides), the end justifies any means and anyone who questions the means is an enemy.

The pitch came across as a quid pro quo because that is what it is. “Don’t take Dominion’s money and we will replace it” is pure “that for this.” It was the story I had predicted 90 days ago. A less sympathetic newspaper would have written a much tougher story. More coverage may yet follow. They have done Dominion a major favor.

I try not to argue with smart lawyers (Clean Virginia claims to have them) but every one of them who has ever advised me said do not, ever, not even indirectly, not in writing or just with a wink or nod, promise financial support in exchange for any action by a legislator. Likewise do not link financial support to any specific action after the fact.

As previously noted by me three weeks ago, the 2018 energy omnibus was all about political clout and huge campaign contributions, but it was the eventual alliance between Dominion Energy and the big environmental groups that pushed the final anti-consumer product onto the desk of a governor who had received unprecedented financial support from environmental groups plus the usual attentions from Dominion.

Nobody gives millions of dollars to politicians without expecting a return, not Dominion, not the League of Conservation Voters and not Clean Virginia if it gets into that big league. Everybody believes the return they are expecting is the right thing for Virginia. The conversation in Virginia about contribution limits should start now.

Most States Use Provider Tax for Medicaid

The pending proposed amendments to the stalled state budget bill, which almost broke the log jam earlier this week, did indeed include not one but two new provider assessments/fees/taxes (you pick the term) on Virginia private hospitals. When both chambers return next week with their “this time we’ll really do something” promises on the line, the fate of both should be determined.

The payments are interchangeably referred to as taxes, fees or assessments around the country. Virginia already imposes one on intermediate care facilities and only one state, Alaska, has avoided any use of this revenue method for Medicaid.

Based on my short research the federal government allows the states to use these “tax the provider to pay the provider” schemes on the whole range of providers, and most states do also tax nursing homes. Others tap pharmacies and managed care providers. There are good summaries here from the National Conference of State Legislatures and from Kaiser Family Foundation. The federal rules do limit just how much the state can tax and still pledge to recycle the money back, but these proposals stay under that limit.

The existing Virginia provider tax on intermediate care facilities raises about $13 million per year. The two new ones proposed for Virginia private hospitals would raise about $383 million in Fiscal Year 2020, the first full year of implementation.

Right between the two provider taxes in the list of proposed amendments there is another new provision calling on a joint legislative group to take another look at Virginia’s tobacco taxes, to see how to handle the new vape products and to see if changes should be made to the restrictions on local tobacco taxes. There is no reference to a health care funding angle as motivation for that. Perhaps there should be.

The provider tax approach to funding Medicaid has a long history. It was proposed and shot down under Governors Gerald Baliles and Douglas Wilder.  During this year’s debate I gave somebody my 26-year-old “No Sick Tax!” lapel pin.

The idea’s attraction is obvious. The hospital or other provider pays the state $1 dollar toward Medicaid expansion and the state uses that to draw down more than $9 from federal matching funds. The second $1 now proposed is collected for payment reimbursement rate increases, but that only draws down $1 additional from Washington’s coffers because that is under the cost share match formula for existing Medicaid programs.

Will those taxes, which appear to exceed 2 percent of gross patient revenue at the 70 hospitals involved, end up coming from individual patients or from their insurance carriers? Hospitals point out correctly that with the federal matching dollars they come out ahead, implying that there would be no need to pass on the cost. Hard guarantees are lacking. Clearly costs are being shifted around, but it seems unlikely they will shrink.

There is an interesting parallel with the proposal related to the Regional Greenhouse Gas Initiative, where people are being told to disregard the carbon tax which the power companies will pay and then get back. Won’t cost us a dime! One difference is the RGGI taxes don’t attract any match. Both ideas have me turning over walnut shells looking for the pea.

In 1992, when Wilder was pushing his own $68 million proposal, the Virginia hospitals led the opposition. “The health care groups say the Medicaid tax inevitably would get passed on to consumers through increased fees and insurance premiums,” was how John Harris of the Washington Post summarized their position. Wilder pushed back citing hospital profits and executive compensation.

The 1992 story also notes that Medicaid had grown from 5 percent to 13 percent of the General Fund budget in just five years. Where it is now and where it is going can be seen in this recent Senate Finance Committee staff slide. Another ten years and it is bumping up against 30 percent.

Call them an assessment or a tax these dollars will not be General Fund dollars and will not change that projection. That is another reason some legislators like the idea. The same Senate Finance Committee staff presentation stated as advantages of this approach:  “Eliminates need for GF support” and “Frees up all Medicaid expansion savings for investment in other budget areas.”

Continue reading

Will Ghosts Haunt The Senate Today?

Hunter B. Andrews

If you listen very, very carefully you can hear it:  A double whirring sound.  It is the sound of the late state Senators Ed Willey and Hunter Andrews spinning in their graves.

Four decades ago as Finance Committee chairs they were responsible for establishing the independent authority of the Senate in the state budget process, which before their day was led by the House of Delegates with the House offering the only actual bills.  The Senate ended its subsidiary role by introducing its own bills to bring to the inevitable annual conference committee.

News broke late yesterday that the 2018 budget impasse may break later today, with the Senate expected to vote to discharge the Finance Committee and bring the House budget bill directly to the Senate floor for consideration.  There will still be Senate amendments offered and adopted, but in reality what will be offered is the final version – the result of an unofficial conference led by Senate Finance Co-chair Emmett Hanger and House Appropriations Committee Chair S. Chris Jones.

Also late yesterday it became obvious that the actual Senate amendments and some summaries were floating around, but initially I couldn’t find them.  They were not posted on the Senate Finance Committee web page.  I emailed a member of the Senate Finance staff and was politely directed to find them on (ahem) the House Appropriations Committee web page.   The Senate hasn’t even met yet but the full amendments are posted by the House.  That to me said it all.

Here is the summary if you’d like to go through it on your own.  I may follow up on the content after adoption but wanted to note this amazing turn of events.  If you are  watching the Senate this afternoon and  the voting board gets glitchy or paintings start falling to the floor, the names of the poltergeists responsible will be easy to guess.

Behavior Has Changed But Within Limits

Gifts per legislator. Source: Virginia Public Access Project

There are plenty of complaints these days that the legislative process is unduly influenced by money, but when the spotlight shines or a major scandal erupts, behavior can change. For example, Virginia legislators simply do not want to report that they have received gifts or attended lobbyist dinners, on public records which are available to their voters, the media and potential opponents.

How few actually do show up on 2018 reports is well-illustrated in the graphic above recently posted on the Virginia Public Access Project (click here for interactive features). Readers of Bacon’s Rebellion are probably already following VPAP as well, but if not this is worth a look.

Except for one very popular event, the annual Agribusiness Council Dinner, 91 of Virginia’s 140 legislators would have reported no gifts or meals at all. In many rural districts the political cost of skipping the Ag Dinner and not being seen by constituents attending would also be high. Yet 64 legislators missed that one, too, and avoided having to explain that $69.48 repast.

Several legislative offices have signs out front expressing a policy against accepting any gifts, even innocuous gifts such as a ball point pen or a box of candy or a calendar. That is growing but is not universal. It is the aversion to reporting gifts or entertainment that is becoming more widespread.

That report makes one think the place has really changed since the Bob McDonnell case, right? Not so fast. First note the data covers the period of the regular General Assembly session, from January 1 to Sine Die in March, not the whole year. As you can see with the full 2017 data here the totals tend to grow through the year, especially with paid trips to summer conferences. But there is no dispute that the number and value of reported gifts and meals is shrinking. For example look at the same report for 2012.

Second, remember that gifts or entertainment expenses of $50 or less do not trigger a reporting requirement. Lobbyists or organizations are keeping a closer eye on the cost of items, but $50 can still pay for some very nice gifts or meals.

Does it at least mean the days of the big restaurant dinners are over? Oh my no – and here is how they do it. It can be tracked on VPAP as well but it takes research. The $50 reporting trigger is interpreted to mean $50 per person per lobbying principal (client) paying the bill. If two clients for the same firm split the tab the trigger is $100 per person, and if three – well, you get the drift.

To confirm this is still the practice I easily found an example, but will not provide the details because I did not reach out to the major lobbying firm involved. I noted that one client reported a dinner on January 25, 2017 with 12 persons and a bill of $149 – well below the cost that would require naming the legislators. But by clicking down its full client list I found four more clients reporting a dinner for 12 at $149 on the same date.

Assuming the firm didn’t host five different dinners that night, the real bill was $745 for 12 people, or $62 per person.  That’s hardly lavish, but the intent to disclose the names of attendees has apparently been thwarted. They could stay on the list of those with no reportable gifts for 2017.

As VPAP helpfully explains: “Disclosure forms do not require clients to state clearly the average cost per person. Calculating the average cost per person may not be as simple as dividing the total cost by the number of people attending. Because the forms and instructions are unclear, the amount listed can represent either the total cost of the event, the amount spent on only the officials who attended or the average cost per person.”

It is silly and arbitrary to assume that somebody who accepts a $51 dinner has been compromised while somebody who skips dessert or drinks and spends $40 has not. Frankly neither has been compromised in my book. The real purpose of these dinners is to get the undivided attention of the legislators for a while – admittedly an advantage for that lobbyist and an edge on the competition. That is reason enough they should be fully reported.

If the costs of a dinner can be shared among multiple clients then the costs of other forms of entertainment or gifts could also be divided, seeking to keep the cost below $50 per client per recipient and keeping the recipient(s) off reports. I have not scoured the records to see if that happens, but nobody should have to.  The General Assembly needs to end this particular game.

Medicaid Can Cost Taxpayers Less than ACA Plans

Source: United Healthcare Group

One of the interesting tidbits gleaned from a presentation last week on the Medicaid expansion debate was that with expansion perhaps 60,000 Virginians now enrolled in Affordable Care Act Public Exchange plans will qualify for and switch over to Medicaid.

People who have low-enough incomes to qualify for Medicaid are also eligible for subsidies for an ACA exchange plan, so both programs are costing the taxpayers. A recent report indicated Medicaid is actually costing taxpayers less than ACA plans for that population.

UnitedHealthcare Group’s report noted – not a surprise – that Public Exchange coverage has proven to be more costly and less sustainable than envisioned (or promised). Since 2014 – the first year of Public Exchange coverage – the average annual unsubsidized premium for a benchmark silver plan has increased 88 percent for a 27-year-old and 76 percent for a 40-year-old.

The original projection was that it would reach 25 million persons by now, and in 2017 it was more like 10 million.  Recent actions at the federal level will keep that from rising much beyond 12 million.

Compare that to Medicaid, which has enrolled more than 16 million additional people nationally since 2013.  These figures are national, and Virginia would vary somewhat, but the estimated average cost for the newly eligible Medicaid enrollee has been $5,400 and the average total cost for Public Exchange coverage has been $9,400.   In the case of the Exchanges, of course, much of that is coming from the consumer’s pocket.

But the low-income Exchange adult enrollees – the persons who could switch with Medicaid expansion – pay only $2,400 out of pocket and their federal share is about $7,000. That is still higher than the cost of Medicaid, which is fully government funded (state and federal combined).

This may not matter much to the Virginia voters and legislators opposed to expansion.  The state taxpayer makes zero financial contribution to the ACA health plan subsidies, and is going to be paying a share of the cost for new Medicaid enrollees.  We should find out early this week if the state Senate has a consensus on the expansion issue.

UnitedHealthcare Group (UHG) is hardly a disinterested observer in this discussion. It provides managed care for Medicaid in various states, now including Virginia, and based on its website it participates in some ACA marketplaces.  If the company has an economic incentive to prefer one approach over the other, it is unlikely to admit that in these presentations.

But it does argue the billions planned for ACA subsidies would be better spent on Medicaid.  It is unsaid but true that the future of the ACA Public Exchanges is cloudy at best, while Medicaid isn’t going anywhere, with or without expansion.

Absent from this is any discussion of quality outcomes when comparing the ACA Public Exchange plans with Medicaid, although UHG does advocate for managed care in general as providing higher quality for lower cost.  And the cost of Medicaid is hardly expected to remain stagnant.  Also absent is any discussion of which is preferred by the providers getting paid under the two approaches.

A footnote in the UHG report takes you to the most recent (2016) actuarial report on Medicaid. It was projecting federal costs would grow almost 6 percent per year, but also reported that the costs for newly-eligible adults were dipping slightly and might dip below those already eligible.  As always the most expensive Medicaid populations were the aged ($14,323 per enrollee in 2015) and disabled ($19,478).

The audit noted most states that had opted for expansion were using managed care contracts to lower the costs.  That will be the case in Virginia, and the 2017 Annual Report on Medallion 3.0, Virginia’s managed care approach, gives you a good idea of the services available.  If this is a choice open to them the lower-income ACA covered population will probably make the change.  It seems a very easy economic choice for them.

(Hat tip: Doug Gray)

Grant Process Tightens at VEDP

Not His Best Day

Tomorrow Governor Ralph Northam travels to the coalfields for what is billed as a major economic development announcement, and steps have been taken so that four years from now he won’t cringe when shown the old photos.

For the past year the Virginia Economic Development Partnership (VEDP) has been doing additional due diligence on companies receiving discretionary incentives, and if there is a high enough level of perceived risk the incentives are paid only after performance.

The tighter policy was described by President and CEO Stephen Moret in a response to my earlier post about detailed performance measures on Virginia’s various incentive programs.  “With this new approach in place, Virginia may not win some projects that we previously would have won, but neither will we place taxpayer dollars at undue risk,” Moret wrote.

The agency and its practices were the subject of a scathing review by the Joint Legislative Audit and Review Commission after the embarrassing failure to launch of a major Chinese-owned project near Appomattox, announced with great fanfare by Governor Terrence McAuliffe.  The firm in that case had received $1.4 million from the state in advance, and two years later a newspaper reporter found obvious signs that should have warned the state it was possible fraud.   Apparently the same pitch was rejected by North Carolina.

Then Moret came in from Louisiana and the General Assembly weighed in with 2017 legislation.  Now Moret reports all applications are vetted by a Project Review and Credit Committee (PRACC).  Prior to the revelations there was no VEDP person assigned full time to administering incentive programs and now there are four – with the potential for more and the inclusion of somebody with commercial credit experience.  Somebody is held to account for each project’s compliance.  

 

“During my first year at VEDP (2017), I asked PRACC to begin producing both company risk ratings and incentive risk ratings for every project, as well as to shift substantially all incentive payments associated with moderate- or high-risk companies to occur after the Commonwealth has received at least as much new state tax revenue as the amount of a given incentive,” he wrote in providing details.  He stressed he is fully on board with the new system.

The early tax money from these projects often comes to the locality, which imposes property taxes on any new building, equipment or business personal property as soon as they enter service.

The state tax revenue tracked is basically two sources slower to kick in, the same two sources that Secretary Aubrey Layne recently complained are too dominant in the state budget – personal income taxes and sales tax.  So for the state to have received an amount equal to the grant, the company has to be well underway in meeting its hiring goals.  The state does add in a multiplier on the assumption that the new employees are spending money generating indirect taxes.  And the state does recognize the substantial sales and use taxes paid on construction materials and other assets.

“Sometimes this means an incentive will be provided only after a project is fully completed; other times it means that incentives are provided in tranches as milestones are achieved. Notably, for low-risk companies (e.g., a large, well-capitalized Fortune 500 firm), we typically propose to provide incentive funds early in the development of a project, as otherwise the impact of the proposed incentive on the company’s decision process would be substantially diluted by the company’s net present value discount rate that often is in the range of 8-10%.”

Continue reading

Wait, A Second Hospital Tax?

For years a Virginia business policy group, the Thomas Jefferson Institute, has been pushing a Virginia tax reform proposal that would impose the sales and use tax on services.  The sales and use tax covers tangible goods, not (with a few exceptions) services.   Looking at the group’s 2015 report on the idea, imposing the sales tax on the broad medical and nursing home industries could generate close to $2 billion per year.

My memory went back to this idea while reading in the Richmond Times-Dispatch this morning that the hospital industry is indeed pushing again for a second “provider assessment” (read:  hospital tax) as part of the ongoing budget debate over Medicaid expansion.   The House of Delegates has included one new tax on hospital revenue to provide the state share of the cost of expanding Medicaid, and the hospitals want to tack on a second tax to increase their reimbursement rate for services.

The idea resurfaced in the Senate staff presentation Monday and then Senate Finance Committee discussions Tuesday.  The committee’s work on the overdue budget has now gone sub rosa for a while so there is no indication this “has legs”, as they say at the Capitol.

The two taxes combined would approach $400 million in 2020. That would be one of the largest tax streams flowing into state coffers, almost half the annual take of the corporate income tax and comparable to the insurance premium and recordation taxes.  The House version of the first provider tax is in effect a sum sufficient provision, meaning the tax will adjust up automatically if required to cover the state’s share of expansion (and the federal share will be shrinking.)

The infusion of major new federal revenue from Medicaid expansion to the hospitals now providing uncompensated care to that population may make it possible for them to absorb any new tax.  In theory the rest of us will be covering for less of that uncompensated care.  And the Thomas Jefferson Institute also helpfully tracks Virginia hospital profits, which grew last year, giving reason to hope customer costs or insurance premiums won’t rise because of the new tax.  The hospitals can eat it, right?  Have any such assurances been made?

But if this is just like every other tax and eventually somebody, somehow has to pay it, why not spread the burden across the entire health care sector by ending the medical sales tax exemption?  The same 1.4 percent tax rate now being proposed might do the trick.  New Medicaid patients will be visiting doctors, out-patient clinics, nursing homes and pharmacies and sending tests to labs.  Many will be in managed care systems – and we want then taking that approach.  If reimbursement rates are to go up, will they go up only for hospitals?  Why should only private hospital revenues be taxed?

Or what if we just ended the non-profit status of so many medical facilities and practices and just taxed their property and profits like any other business?  What if we doubled Virginia’s famously low tobacco products taxes, raising another $170 million for dealing with the health-care consequences of that poisonous habit?

The “third rail” status of the whole idea among most Republicans – including most Republican legislators – has forced this discussion off a rational plane and into a perpetual posturing zone.   A serious tax policy discussion of how to pay for this and what the impact would be on customer costs might or might not end up with these “provider assessments” as the right choice, but there has been no debate.

Wonk Corner:  Briefing on Medicaid Expansion

You have to read the footnotes:  The state estimates that should Virginia approve an expansion of Medicaid to an additional 300,000 low income persons, about 60,000 people now covered by individual ACA plans will revert to Medicaid.

That snippet is buried in a presentation made yesterday to the Senate Finance Committee by its staff, which is a great introduction for the non-experts among us.   Whether and how to expand Medicaid is, of course, the main sticking point which has prevented adoption of a state budget.

And by agreeing to a new hospital tax to provide the state’s share of the cost of expansion, the House of Delegates was able to authorize more spending than the Senate in several other key areas of the budget – all politically popular with somebody, creating a minefield of sticking points.

The hospital tax actually will reduce by 40 percent the financial benefit of Medicaid expansion to many of the hospitals serving that population, and the staff report notes that some hospital leaders are pushing a higher tax in order to increase their fees for Medicaid services to 88 percent of their costs.

The staff’s short list of advantages and disadvantages to the hospital tax fails to even raise the possibility that one way or another ultimate costs to consumers will rise further.  This is a new tax, a tax on a service.  It will be imposed on private hospital revenue from all sources – private pay, Medicare, ACA plans, major insurance carriers or the myriad other choices consumers use.  The tax is not imposed on other providers who will treat these newly-covered patients.

The staff also went through a list of conditions and variations to the traditional Medicaid coverage that Virginia might consider to control costs.   The House of Delegates has opted for a work or job training requirement.  One other option is creating health savings accounts. Right, somebody working in a fast food restaurant has the cash flow to fund an HSA.  Please.

As you will note on slide 15, the Senate has voted to expand Medicaid as well, but with a very limited new caseload.  Majorities in both chambers are on record supporting benefits to people at 138 percent of the federal poverty level, up from 100 percent.

The expectation is that the Senate Finance committee will hash all this out this week and have something to present to the full Senate by May 22.  It is possible unofficial discussions on the final compromise are already going on between some of the leaders in both chambers, but no official conference committee can be named until the Senate actually acts on a full budget.