The sweeping Democratic victory in Tuesday’s elections greatly increases the odds that Virginia will expand Medicaid — something Democrats have been trying to do for all of Gov. Terry McAuliffe’s term.
New figures from the state’s Department of Medical Assistance Services, however, offer a reminder that sometimes it’s good to be careful what you wish for.
The forecast predicts that Medicaid will cost the state an additional $670.6 million during the next three years — before any expansion takes place. Believe it or not, that actually qualifies as good news. Chris Jones, the chairman of the House Appropriations Committee, thought the number would be even higher. That says a lot about the program’s runaway costs.
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Over the past decade, Medicaid spending has grown at an annual rate of 8.9 percent — far faster than the budget as a whole (although that has grown plenty, too). Ten years ago Medicaid accounted for 14 percent of the state’s general fund. Now it accounts for 22 percent.
Officials hope a new approach will keep it from hitting one-fourth of the budget. They intend to shift thousands of beneficiaries from the traditional fee-for-service model to a managed-care system conducted through private insurance companies. The insurers will receive a fixed sum each month. If they can bring costs down below that amount, they can pocket the difference.
With the changes in place, officials predict that Medicaid spending will rise only 2.5 percent in the first year and 3.4 percent in the second. Now here’s the kicker: The projected cost increase of more than $670 million is built on that assumption of lower growth. If the growth projections turn out to be overly optimistic, the actual cost increase will be substantially higher — eating even further into education, public safety, and all the other state services that have been squeezed by Medicaid’s growth.
Nobody wants to see Virginians go without medical treatment because they lack the ability to pay. At the same time, state leaders — including freshman lawmakers — need to come to grips with the iron law of opportunity costs. The more Medicaid spending goes up, the less money the commonwealth has for other pressing needs. Eventually, something will have to give.