Medical Spending Swells Va. Budget

Technology's Cost Among Factors

RICHMOND -- Bob Kardian has worked for the state of Virginia for 34 years. And in each of those years, he said, he's rarely been to the doctor except for the occasional checkup.

"I've been lucky to be blessed with such good health," the 55-year-old Department of Transportation engineer said during a lunchtime interview at the state's sprawling government complex.

But even though Kardian has hardly been a drain on the state's health care costs -- never had surgery, never spent much time in the hospital, he said -- the state's share of the coverage for such a healthy and hale worker continues to rise every year. In 2000, the state average health care spending for an employee like Kardian was $3,764. In 2004, it shot up to $5,548.

As lawmakers discuss adjustments to Virginia's budget, one thing is for sure: They will see that the state's share of health care costs continues to be one of the driving forces of the budget, even as lawmakers try to tighten rules allowing people into the Medicaid program or to privatize some public health services.

Health care expenditures by the state include payments for people like Kardian: the 91,000 current or retired state employees who are on the state health care plan, a program that cost the state $561 million in 2004.

But the state's responsibility also includes payments for the nearly 700,000 people on Medicaid -- a price tag for the state that exceeds $2 billion a year -- and the health care for Virginia's 31,000 inmates, which was nearly $100 million in fiscal 2004.

In all, the cost of providing health care for more than 800,000 Virginians has increased 45 percent between 2000 and 2004. Meanwhile, the state's spending, not including federal support, has increased about 11 percent overall for the same time period.

Health care is "a huge drain on the budget every year," said House Appropriations Committee Chairman Vincent F. Callahan Jr. (R-Fairfax).

"When I came down here, Medicaid didn't even exist," he said. "Now it's 12 percent of our budget. We have a lean program, and costs are still going up."

The increases to state health care costs partly reflect the same factors that drive it up nationwide: expensive technological advances, labor shortages in the health care industry that boost wages and a rise in the number of people -- often older people -- using health care services.

Workers covered by the state employee health system, Anthem, are getting older: In 2004, the average age of a covered employee was 47.3 years old, up from 46 years old four years earlier. The average age of a private sector employee covered by Anthem in 2004 was 43.5.

"The aging workforce has a direct impact on our health care costs," said Sara Redding Wilson, director of the Virginia Department of Human Resource Management.

Added Christopher Bailey, a senior vice president for the Virginia Hospital and Healthcare Foundation: "Technology changes are usually a good thing. . . . A new technology generally does better than an old one, but they always cost more. But what's hard to measure is, for this additional spending, are we buying better outcomes?"

Like other states, Virginia is suffering from a shortage of qualified health care professionals -- nurses and X-ray technicians, for example -- which drives up wages.