After two years of historically low growth, per-person health care spending is projected to rise sharply in the next year - a trend that could affect West Virginia's Medicaid population and those who have enrolled in plans through the federal marketplace.
The Obama administration announced earlier this month that health care spending is expected to average $10,000 per person this year, and will encompass more than 20 percent of the federal budget by 2025, up from roughly 17 percent last year.
Part of the shift has to do with an aging population - by 2025, one in five people will be enrolled in Medicare, according to the administration.
The problem is worse in West Virginia, where nearly one in four residents are already Medicare beneficiaries, according to the AARP's West Virginia chapter. That, coupled with the state's burgeoning Medicaid population, could mean trouble when cash-strapped West Virginia has to begin paying 5 percent of the coverage for its 170,000-plus Medicaid expansion population in 2017.
"As you see increases in inflation and the cost of care, you could certainly see increases in various elements of the Medicaid budget," said Jeremiah Samples, deputy secretary in charge of public service and strategic planning for the West Virginia Department of Health and Human Resources. "The expansion population, in particular, is insulated more than the traditional Medicaid program simply because there are more federal dollars supporting it. If you see a 10 percent increase in health care spending - and that's not what we're experiencing - then the vast majority of that would be soaked up by the federal government."
Samples said both of West Virginia's Medicaid populations - traditional and expansion - are subsidized by the federal government. Its traditional Medicaid population receives a less substantial match than expanded Medicaid; the state pays about 28 percent in matching dollars for the traditional population, but for a program that costs more than $4 billion to run, West Virginia's obligation is still nearly $1 billion, Samples said.
"Federal match is absolutely critical to the state's Medicaid program," he said. "West Virginia has one of the largest matches for traditional Medicaid in the country, but that's still almost a billion dollars the state has to come up with for the program. That's why the department, for the last few years, has been engaged in so many cost-saving strategies - trying to be more efficient, have better care coordination, reducing or eliminating redundancies, moving charity care programs to Medicaid ... these are all strategies we have to do to live within our means."
In West Virginia, 517,111 people were enrolled in Medicaid in 2015, according to the West Virginia Department of Health and Human Resources. Another 396,000 were reportedly Medicare beneficiaries, bringing the total number of Medicare/Medicaid recipients more than half the state's total population.
"Medical inflation is a serious issue for the entire health care industry," Samples said. "It applies to the Medicaid program, it applies to PEIA and it certainly applies to the commercial market ... for example, pharmaceutical costs across the board, for every segment of the market, have been increasing at pretty high percentage rates for the last few years, and there are a lot of new drugs hitting the market that are very expensive."
For Terri Giles, executive director of West Virginians for Affordable Health Care, pharmaceutical costs represent a "chink in the armor" of the Patient Protection and Affordable Care Act, thanks to negotiations early on that kept any limitations on drug companies from being part of the law.
"The costs are rising, but it's not the jump we had before [the ACA]," Giles said. "I think the big elephant in the room is that there are no limits on pharmaceutical companies. They can charge whatever they like. We have no ability to negotiate from a public perspective in terms of Medicaid or Medicare, and those costs have just skyrocketed, so there's going to have to be some kind of rein-in on pharmaceutical companies."
Giles pointed to speculation that slow growth after the 2008 recession is part of what held health care costs at bay, but said she believes states like West Virginia, with non-competitive insurance marketplaces, are poised to be hit harder by increasing costs. One solution could be to introduce a "public option" in marketplace's like West Virginia's, Giles said - a proposal removed from the original ACA that would allow for a government-run insurer that would compete with private companies.
"In some states that have little or no competition, that's part of the reason costs are high," she said. "That's why both the president and [U.S. Health and Human Services Secretary Sylvia Burwell] have said, 'Maybe it's time now to look to a public option.'"
Delegate Matthew Rohrbach, R-Cabell, a Huntington physician, said that while the state has been positioning itself to absorb increased costs from the Medicaid program, it will need to find more innovative ways to offset the large portion of Medicare and Medicaid recipients in the state.
"We need to work effectively to get our Medicaid program running as efficiently as possible, and we've taken some major steps in that regard," he said. "Moving to managed care was a huge step and resulted in some huge cost savings for the state, but we're kind of just treading water right now ... we need to save enough money in the system to allow for our population's inevitable aging, because as people age, they use more health care."
Although Rohrbach noted that the state can't do much about its aging population, it needs to redouble its efforts on attracting jobs and combating drug abuse, as well as investing more in the preventive side of medicine, to prepare for increased costs.
"We need to stimulate employment in our state, so that people will move off of Medicaid and onto private insurance because they'll have better-paying jobs and a brighter future," Rohrbach said. "The other big thing - and I feel very strongly about this aspect of it - is preventive medicine. We lead the nation in obesity, diabetes, heart attack, stroke, respiratory disease and smoking. We've got to turn those statistics around in order to get a healthier population that won't use as much health care, particularly when they're young. That's the key, and healthier people are more employable people."
Reach Lydia Nuzum at lydia.nuzum@wvgazettemail.com, 304-348-5189 or follow @lydianuzum on Twitter.