Meet Our Newest Staff

Budget Beat for May 24, 2013

Evidence Counts – the WVCBP blog

As the date rolls closer for the full implementation of the Affordable Care Act and in the same week that the U.S. House of Representatives voted for the thirty-odd time to repeal the law, the Wheeling Intelligencer reported on a doctor forced to close his doors due to Obamacare. The reason given is that the cost of transferring his records to an electronic system was unaffordable. However, as Brandon’s blog post explains, there is not a provision in the ACA that requires doctors to do this.

Leading up to its decision to expand Medicaid, the state of Kentucky took an in-depth analysis of the costs and benefits and found that expansion would save the state about $800 million over eight years. Applying this model to West Virginia shows that the state would save $320 million through 2021. This is a far different picture than the estimates that show expansion costing the state millions. Read more about this interesting study in Brandon’s blog post.

A new method used to measure poverty rates shows that 11% of West Virginia seniors live in poverty. This is slightly higher than previously used measures. What different criteria are taken into account under these methods? Check out Sean’s blog post.

In his other blog post this week, Sean looked at the latest tax incentives given to South Charleston’s Gestamp plant. The plant’s effective tax rate now drops to less than one percent while its employees will likely pay around 9%.

WVCBP in the News

As mentioned above, new tax incentives were announced this week for the Gestamp plant. Ted and Sean were quoted in this State Journal article asking how the state can know whether or not incentives like this actually create jobs or attract businesses to West Virginia when no reliable tracking reporting is done.


Welcome, Tristan and Chris!

This week the WVCBP welcomed our summer Research Associates, Tristan Shorter and Chris Nyden. Both come to us from West Virginia University. Tristan will research the state’s labor force participation rate and assist staff with a survey on legislative fiscal notes. Chris will study the costs of higher education and alternative sources of funding.

 

What We Are Reading

Not to be confused with our Fiscal Policy Analyst, Sean O’Leary from the Eastern Panhandle has written “The State of My State: A Native Son’s Search for West Virginia.” The book is a selection of essays from his columns in the Martinsburg Journal. Check out the review by WVCBP Executive Director on the back cover. For more information visit www.the-state-of-my-state.com.

Medicaid Expansion Could Net West Virginia Millions — Lessons From Kentucky

Earlier this month, Kentucky announced it would be joining West Virginia and 19 other states in expanding Medicaid as part of the Affordable Care Act.  Kentucky, however, had stronger evidence to support its decision than West Virginia.  While West Virginia estimated expansion would cost the state around $375 million over the first 10 years, Kentucky looked not only at the costs but also the savings and increased tax revenue from Medicaid expansion and found it would save the state $802 million over eight years (Figure 1). If we apply these same findings  to West Virginia, we could also save money, netting around $320 million through 2021.

Figure 1: Cumulative Net Impact of Medicaid Expansion in Kentucky Through FY2021 

Source: “Analysis of the Affordable Care Act: Medicaid Expansion in Kentucky” Kentucky Cabinet for Health and Family Services

If you recall, I blogged about how the CCRC Actuary report used to estimate the impact of Medicaid expansion in West Virginia was incomplete.  The report concluded that expanding Medicaid would cover an additional 91,500 state residents while bringing in $5.2 billion in federal revenue and costing the state around $375 million over 10 years.  The report, however,  didn’t consider the expected economic impacts from job creation and increased tax revenue that most other states have included in their analysis nor did it look at the cost savings to the general revenue fund from anticipated reductions in expenditures to budget items such as behavioral health, local health departments, community health centers, and corrections. 

 Sources: U.S. Census Bureau (quickfacts.census.gov), America’s Health Rankings (www.americashealthrankings.org)

As you can see from Table 1, West Virginia and Kentucky have very similar demographics. Both states have high poverty rates, poor health outcomes, and about the same the share of folks without health insurance.  Using Kentucky’s findings to estimate the impact of expansion in West Virginia then can give us at least a rough idea of the full effect of expansion.  As a very rough ‘back of the envelope’ calculation, I used Kentucky’s estimated total net impact ($802.4 million) divided by the total number of people who would be newly eligible for Medicaid (308,397) to find the total net impact per patient ($2,602).  Assuming a $2,602 net impact per patient in West Virginia with 123,806 newly eligible under the expansion, the total net impact in West Virginia would be around $322.5 million over eight years.  Using the same calculation with Kentucky’s job creation estimate shows West Virginia would create around 6,700 new jobs (Table 2). As you may recall, this is just above the number of jobs that Families USA found would be created by Medicaid expansion in West Virginia. 

While these are rough estimates, it is likely they reflect a closer approximation of the net economic impact of Medicaid expansion on the state’s budget and economy than the CCRC report which fails to consider savings the state budget and the increase in tax revenue collections. With this in mind, West Virginia should consider putting together a similar analysis as Kentucky. That way, legislators and the public would have a more complete picture of the impact of Medicaid expansion on the state budget and understand that it will most likely not require tax increases or finding additional revenue.

Gestamp Property Tax Deal Worth $25 million

Last week, the West Virginia Economic Development Authority authorized $150 million in bonds that will be used to purchase equipment for the Gestamp stamping plant in South Charleston over the next five years. The Development Authority will purchase the equipment needed for the stamping plant and lease it back to Gestamp, which allows Gestamp to avoid paying property taxes on that equipment. According to this State Journal article, the arrangement is similar to those currently being given to Quad Graphics in Martinsburg and Toyota Motor Manufacturing in Buffalo. While Gestamp will make regular lease payments to the Development Authority, the property tax savings will be significant.

When we first estimated the value of the package of incentives given to Gestamp, we calculated that the property tax savings would be $12.5 million, based on $100 million in equipment being leased for 13 years. Now that the Development Office has announced it will authorize up to $150 million with a 20-year lease, the potential savings have doubled.

The Development Office says it will purchase equipment over the next five years. Assuming that those purchases are in equal increments of $30 million per year for five years, and the leases are held by the Development Office for 20 years, Gestamp will save $25.7 million in property taxes, at today’s rates. That is an average of $1.3 million per year. That would bring its total tax savings from the package to $69.2 million, which in addition to the property tax savings, includes $4.2 million in B&O tax savings, $32.5 million in corporate net income tax savings, $82,000 in business franchise tax savings, and $6 million in sales tax savings. 

The tax incentives will lower Gestamp’s overall state and local effective tax rate from 2.8% to 0.4%, while its employees will likely see a tax rate closer to 9%. Including the other incentives, Gestamp will receive at total of $98.3 million in state assistance.

And, as it was when we first looked at this incentive package, the state currently does not have the ability to evaluate if these state and local tax incentives given to Gestamp are cost-effective or a good use of the public purse.

11% of West Virginia Seniors Living in Poverty Under New Measure

A new report from the Kaiser Family Foundation looks at the poverty rate of seniors across the country. The report uses the new supplemental poverty measure from the Census Bureau to estimate poverty rates. According to the Census Bureau, poverty rates among elderly West Virginians are slightly higher under the supplemental poverty measure (11%) than under the official poverty measure (9%).

The supplemental poverty measure differs from the official measure in a number of ways. The official poverty threshold is set at three times the subsistence food budget from 1963, adjusted for inflation. The official measure counts all pre-tax monetary income, which includes wages and social security benefits. The official poverty threshold is lower for households with elderly members.

The supplemental poverty measure bases the thresholds on more recent measures of expenditures, and adjusts them for home ownership status and regional housing prices. The supplemental measure does not differentiate between adults above and below the age of 65. The supplemental measure adds the value of tax credits and  in-kind government benefits (like food stamps) to income, while deducting job-related expenses, taxes, and out-of-pocket expenses for health care. 

The deduction of out-of-pocket expenses for health care from income is the biggest difference maker when it comes to comparing senior poverty rates. In 2009, half of seniors spent at least 16% of their income on health care.

West Virginia actually saw one of the smallest jumps in senior poverty rates under the new measure. Nationwide, the senior poverty rate jumped from 9% to 15% under the new measure, compared to West Virginia’s increase from 9% to 11%.

The percentage of seniors at 200% of the poverty threshold or below also increased in West Virginia, from 38% to 43%, while it increased from 34% to 48% nationwide. 

While the supplemental measure shows an increase in the number of West Virginia seniors living in poverty over the official measure, West Virginia was one of the few states where the increase was actually not statistically significant. 

Is Obamacare Forcing West Virginia Doctors Out of Practice?

An article in yesterday’s Wheeling Intelligencer claims that a Northern Panhandle pediatrician is being forced to retire because of the costs of Obamacare.  It makes for a great headline for opponents of the Affordable Care Act, but is it true?  In short, no, at least not for the reason cited.

Dr. Ventosa’s primary claim is that he will have to computerize his patient records under the ACA, costing him at least $40,000 and requiring two additional office staff. It’s worth pointing out that paper records are a thing of the distant past in virtually every industry other than health care, even my dog’s veterinarian is using electronic records!  Plus, electronic medical records (EMR) have been found to reduce the likelihood of mistakes in healthcare, from the innocuous but costly duplication of lab tests, to the potentially serious, sometimes fatal, misprescribing of medications, while lowering costs of care over the longterm.  

Putting that aside, Dr. Ventosa’s claim that he is required to computerize his records is simply incorrect.  While the ACA does promote the use of electronic medical records, nowhere in the law does it mandate that any providers make the switch.  On the contrary, the federal government offers funds to assist and encourage physicians to adopt EMR.  This includes up to $63,750 for physicians and their practices through the Medicaid Electronic Health Records Incentive Program. 

There is at least one very legitimate concern highlighted by Dr. Ventosa in the Intelligencer article, and that is a shortage of qualified medical professionals in many areas of the state.  After the ACA is fully implemented, it is estimated that 170,000 additional West Virginians are expected to have health insurance and they will need providers who are willing to see them.  Certainly though, having too many insured West Virginians is a better problem to have than too few insured patients.  The federal government is taking steps to address this issue as well by providing incentive pay and/or student loan payback for health professionals who practice in currently underserved areas. 

While we should applaud Dr. Ventosa for his decades of dedicated service to the children of this state, his reasoning to retire doesn’t square with the facts about the ACA.

Here Are Some Things to Think About

Budget Beat for May 17, 2013

Evidence Counts – the WVCBP blog

Cuts to the FY 2014 state budget are beginning to take their toll as the state’s colleges and universities react by taxing college goers with an increase in tuition. With state aid decreasing and tuition costs increasing, students and their families are taking a double hit, while the state continues to make inefficient business tax cuts that mostly go to the wealthy. Get the details in Sean’s blog post this week.

West Virginia In-State Tuition Skyrockets 

West Virginia often has the dubious distinction of coming in first place and not in a good way. Being “number one” in unfavorable categories can create a stereotype of the state’s low-income residents who need income supports because of low-paying jobs and a lack of job opportunities. Debunking that myth in his blog post this week, Ted shows how the number of West Virginians dependent on cash assistance has decreased dramatically over the past few decades and the state is no more reliant on cash assistance than elsewhere in the nation.

Among those undesirable rankings is the state topping the nation in the number of unintentional drug overdose fatalities among those between 18 and 45 years old. In his blog post this week, Brandon explains how another benefit of Medicaid expansion will be covering uninsured people who have substance abuse problems. Not only will this help individuals in need, but addressing the state’s rampant drug abuse problem will help its prison over-crowding crisis and help bring fiscal stability.

WVCBP in the News

This week Downstream Strategies released a new report on the future of coal production. In 2010, the group teamed up with the WVCBP to release a report on the impact of coal on the state budget and how the industry actually costs the state more in infrastructure and other costs than it provides in employment and severance taxes. According to the federal government, coal production will drop drastically over the next 30 years, in large part due to the increase in natural gas production. How will the state prepare for the inevitable ripple effects of this major shift? Read more in the Charleston Gazette’s story from this week.

Ending Poverty

Much of our research and policy work this year will focus on how to reduce poverty in West Virginia. One interesting approach is to get rid of all assistance programs and provide everyone with a basic income guarantee. While we don’t endorse this concept, it makes for an interesting Friday afternoon read.

The Medicaid Expansion’s Unexpected Impact on Drug Abuse

When Governor Tomblin announced earlier this month that West Virginia would be expanding Medicaid as part of the Affordable Care Act, there was little said on how this move will positively impact the state’s substance abuse problem.

The Governor’s Advisory Council on Substance Abuse (GACSA) (created by Tomblin in 2011) estimated that there are over 150,000 West Virginians with substance abuse problems in need of treatment. Without appropriate intervention or treatment, people with substance abuse problems are more likely to be unemployed, commit a crime, be arrested or incarcerated, and even die young (West Virginia leads the nation in death by unintentional overdose among adults 18 to 45).  It should come as little surprise then that final recommendations from the GACSA included providing more options for intervention, treatment and recovery, earmarking additional funding for substance abuse treatment efforts, and an improved “after care” system for individuals in recovery. 

Fortunately, Medicaid expansion may be the unexpected solution to GACSA’s recommendations.  As a result of the expansion, between 91,500 and 130,000 additional West Virginians will be newly enrolled in Medicaid, many of whom will need substance or alcohol abuse treatment.  Although we don’t have specific data for West Virginia, other states like Virginia have estimated that over one-third of the newly eligible population will need mental health and/or substance abuse services. This could mean that upward of 44,000 West Virginians will gain access to much-needed substance abuse and mental health treatment as a result of Governor Tomblin’s decision to expand.

Untreated substance abuse is also an important factor in chronic health conditions, and those without insurance are at an even greater risk.  The side effects of being uninsured are well documented – increased rates of chronic illnesses like diabetes or hypertension, delayed access to treatment and medical care, decreased life expectancy, and ultimately increased mortality.  In addition, uninsured individuals are likely to delay seeking treatment which can greatly increase health care costs as patients require more complex, more expensive care.  Currently, there are nearly 260,000 uninsured West Virginians, including around 20 percent of residents 19 to 64.

Expanding Medicaid to insure more West Virginians may even save the state money in some other unanticipated ways too.  For example, improved access to substance abuse services has been shown to reduce the incarcerations due to drug-related offenses, which happens to be the leading cause of incarceration in West Virginia.

By choosing to expand Medicaid in West Virginia, Governor Tomblin has not only ensured improved access to health care and financial stability for tens of thousands of West Virginia families but has taken an important step in addressing the rampant substance abuse problem that’s hurting our state’s fiscal and physical health and crowding up our prisons.

The “Welfare Dependency” Myth in West Virginia

In discussions about poverty in West Virginia and Appalachia, it doesn’t take long before someone blames “welfare dependency” for the plight of West Virginia’s poor and its lack of economic welfare. The idea of West Virginia having a “culture of poverty” is nothing new. In fact, its roots date back to the 1960s.

As Mil Duncan noted in Rural Poverty in America, popular books such as Night Comes to Cumberland (1963), Yesterday’s People (1965), and Stinking Creek (1967) all popularized the myth of “welfare rolls as a way of life” in West Virginia and the “widely held stereotype of lazy, dependent hillbillies who do not share American values about work.” As Duncan notes, these accounts largely ignored the more important social and economic structures that kept so many people from escaping poverty.

According to Duncan, these barriers included the economic volatility of the coal industry and its tight control (over stores, unionization, minsters, doctors, investment)  over the community, the political patronage system and “business” of county welfare systems, and the lack of investment in human and physical infrastructure to diversify local economies. While some of these barriers have lessened over time, the legacy remains in many coal communities.

While many people still believe that the state suffers from “welfare dependency,” the most common form of welfare  – family assistance income or “cash assistance” from the Temporary Assistance for Needy Families (TANF) or what was previously known as Aid to Families with Dependent Children –  has shrunk considerably over the past several decades.  In fact, family assistance income as a share of the state’s total income and the number of adults participating in the program is at a historical low.

At its peak in 1962, cash assistance made up only 1.2 percent of the West Virginia’s total personal income. Today, it  makes up only 0.2 percent of personal income – which about the same amount as the national average.

 

 The number of families, children, and adults enrolled in cash assistance programs has also dramatically declined over the last several decades. Much of this decline has to do with the large welfare reforms made in the late 1990s, known as the Personal Responsibility and Work Opportunity Act, that restructured and reduced family assistance. 

As the chart below illustrates, the total average monthly caseload in AFDC/TANF peaked in 1993 at 41,294 and fell to 18,022 in 2012. In March 2013, there we only 16,339 families enrolled in the program.


 

More striking, the number of children and adults participating in the programs has plummeted. In 1992, there were more than 73,000 children and 45,000 adults receiving family assistance compared to just 18,022 and 6,847 in 2012. In March 2013, only 5,823 adults were receiving family income assistance.

To put this in perspective, the share of adults enrolled in family assistance compared to adults in poverty has shrunk considerably over the past three decades. In 1989, there were approximately 188,957 adults between 18 and 64 in poverty in the state and 42,074 receiving family assistance. This is represents approximately 22.3 percent of adults in poverty. Fast forward to 2011 and this number has dropped to less than four percent, with 210,000 working age adults in poverty and only 8,000 working age adults receiving family assistance.

As this analysis makes clear, West Virginia is far less dependent on cash assistance than it was in the past. In fact, West Virginia is virtually no more dependent than the rest of the country on what most consider “welfare.” 

Over the next couple of weeks, I will look at other social safety net programs, such as SNAP (food stamps) and Supplemental Security Income (SSI),  and how the increase in enrollment in these programs has more to do with the decline of good-paying jobs and chronic economic recessions than “dependency.” Stay tuned. 

Budget Cuts Leading to Higher Tuition

Back when we released our report on the FY 2013 budget, we warned that the budget cuts targeting higher education would likely lead to higher tuition, making a college education even less affordable. And it didn’t take long for our prediction to come true, as this week  New River Community and Technical College and Marshall University both announced plans to raise tuition in reaction to the cuts in the FY 2013 budget.

While the $34.8 million in higher education budget cuts have been cited as the reason for these recent tuition hikes, state support for higher education has been on a downward trend for several years now. As this post showed, state appropriations per full time student fell 29% between 2002 and 2011. 

At the same time, tuition at institutions across the state have been on the rise.

Not only is tuition growing as state support erodes, tuition is also growing faster than income for West Virginians. Average tuition costs as a percent of median household income in West Virginia has risen from 9.6% in 2002 to 12.3% in 2011.

While some state officials would like to blame Medicaid on the current budget crunch, leading to the squeezing of higher education, a far bigger culprit is the continuing business tax cuts, which cost the state nearly $200 million in revenue each year. And the end result of these tax cuts is a hidden tax on students. As we’ve seen so far, the business tax cuts have been paid for by college students and their families.

UPDATE

Rising tuition brought on by budget cuts will likely contribute to West Virginia’s growing student loan problem. Nationwide, student loans are the fastest growing source of consumer debt, and now total nearly $1 trillion nationwide. And paying back student loans is becoming quite the challenge, particularly in West Virginia, which has the highest student loan delinquency rate in the country.

 

Who’s New at the WVCBP

Budget Beat – May 10, 2013

Evidence Counts – the WVCBP blog

Watch where you get sick. Costs for medical procedures in West Virginia can vary wildly from hospital to hospital, costing thousands of dollars more depending on which hospital is performing them. Read more in Ted’s blog post.

The power of West Virginia’s governor is second only to Maryland. Since the governor’s vetoes typically take place after the regular session adjourns and legislators go home, they rarely get overridden since it would take 3/5th of both houses to call for a special session. This gives the governor final say on most pieces of legislation. Read more in Ted’s blog post.

Income inequality is persistent in the Mountain State and has been rising for the past 40 years. In fact, the wealthiest one percent of West Virginians held 20 percent of the income in 2005, up from a long-term average of about 10 percent. And, as shown below, the share of income held by the top 10% continues to rise. Read more in Sean’s blog post.

More Income in Hands of Wealthiest West Virginians

 

 

Welcome, Brandon!

The WVCBP is pleased to announce the addition of Brandon Merritt to our staff. Brandon is joining us as Health Policy Analyst. Brandon received a B.S. in 2006 from West Virginia University and earned his Masters in Public Health with a concentration in Programs, Policy, and Management from Tulane University in New Orleans in 2008. Brandon comes to us with extensive knowledge having studied comparative health policy and health economics in graduate school. Brandon also has a broad array of professional experience having worked in public health at both the state and local levels as well as serving as a Board Member of West Virginians for Affordable Health Care since 2009. His focus at the WVCBP will be, as his title suggests, health policy, and his addition to the staff will allow us to expand our research and analysis of this vital public policy area to new levels. You can reach Brandon at  bmerritt@wvpolicy.org.

Brandon’s first blog post is about the recent decision to expand Medicaid in West Virginia. The report upon which the decision was based, however, does not give the complete picture. Beyond the help the expansion will provide to low-income families and their access to health care, there will be economic benefits to the state as well as to its budget.

How Much Do You Know About Medicaid?

Now that we know that West Virginia will officially be expanding its Medicaid program to offer coverage to tens of thousands of low-income families, let’s step back and take a look at this program. Did you know that it was created by Congress in 1965? Did you know that almost half of Medicaid enrollees in the nation are children but they only make up about 20% of the spending? Want to know more including who and what Medicaid covers? Check out Policy Basics: Introduction to Medicaid coming to us from the Center on Budget and Policy Priorities.