THCB regulars will appreciate the running conversation I’ve had over the months with Brian Klepper of the Center for Practical Health Reform about how fast things are getting how bad, (hint: he is more pessimistic than I am, but sees a less cataclysmic outcome) and what the likely end result will be. Brian is particularly concerned that state agencies are the canary in the coal-mine of the health care system, and after the LA Times reported about California state agencies being unable to afford their employees retirement care, he wrote this.
One piece of the HC crisis that has received too little attention is the dilemma of state governments, and the ramifications for the health system as their financial commitment to health care is necessarily constrained.
The private sector has responded to HC cost by steadily reducing its commitment to coverage. The percent of private sector jobs with health benefits dropped by 1/3 in the last 13 years, and the erosion of jobs with benefits in this sector appears to be accelerating.
But the public sector has for the most part simply paid, at least so far, with relatively little focus on cost management. This steady infusion of cash has propped up the health industry, but it has also created the illusion that the health system’s financing is stable.Now, as the LA Times article points out, every state budget is under siege due to its HC costs, which are reflected in its fastest-growing line items: for state workers, retirees, Medicaid and prisons.
There is a calculus, a theory of limits, at work here. The concern is that, in the face of fiscal crisis, much of which can be traced to a single issue, all states will need to rapidly cut back on health care allocations across the board. In addition to the obvious human ramifications, the sudden impact on health care providers and suppliers, already experiencing revenue reductions from drops in private sector coverage enrollments, will be profound. The changes in HC funding could come at once, like all the passengers rushing to one side of a boat.
In other words, the states’ dilemma is one candidate for the HC tipping point.