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Delaware's Health Care Approach A Panicked Move
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The state is moving forward on a Delaware Health Care Innovation Plan that to implement will involve a one time outlay of $160 million and $190 million annually for 10 years. The major components of the plan will include a health information exchange, a "holistic" approach to work force development, and a new Delaware Center for Health Care Innovation.
 
A major justification for this government intervention is that Delaware spends almost 25% more than the national average on health care, a level and a rate of growth that is unsustainable. The current research literature and available data makes it appear that this alarm is overstated.
 
The most recent data (2009) on personal health care spending per capita by state from the Centers for Medicare and Medicaid Service (CMS) shows 25 states exceeding the national average, led by Massachusetts at 36% above and Delaware at 24%.
 
Descriptive analysis of the data (Medicare & Medicaid Research Review, vol 1, no. 4, 2011) found that the highest per capita spending tended to be in states that had older populations, higher per capita income, and fewer uninsured persons (higher shares of Medicaid enrollment). More statistically sophisticated analysis of the data (Medicare & Medicaid Research Review, vol 3, no. 4, 2013) confirmed those three factors and added "bad health" (the prevalence of smoking and obesity) and the community hospital beds per 1,000 population.
 
Based upon these findings, the higher per capita health care spending is more understandable and less threatening.
 
Almost 16% of Delaware's resident population is age 65 and over compared to 14% across the nation. Due to the attractions of southern Delaware, no sales tax, no personal income tax on social security, and low property taxes, this gap is projected to continue to expand. This means that at least one-fifth of the health care expenditures per capita in Delaware are paid for by the Federal government through Medicare.
 
Over the past 20 years per capita income in Delaware has fallen from above the nation to slightly below today. So rising per capita income will not be a growth factor for per capita health care expenditures in the state.
 
After raising its Medicaid eligibility requirement in 1996 to 100% of the Federal Poverty Level (FPL), Delaware's per capita expenditures on health care rose more rapidly than the nation. Today just 10.7% of Delaware residents are uninsured compared to 15.8% across the U.S. As a percent of total population, Delaware's Medicaid enrollment is 14% higher than the nation's.
 
Three factors will be curbing the Delaware Medicaid gap. First, under the Affordable Care Act all states receiving Federal support will have to raise Medicaid eligibility to 138% of the FPL. Second, as the nation moves away from the 2008 recession, total enrollment in Medicaid is slowly falling. Third, the state of Delaware's contribution to Medicaid has grown to be such a large proportion of the General Fund that efficiencies have to be found.
 
The prevalence of smoking is dropping across the nation and Delaware has helped to encourage this with a recent 39% hike in the state cigarette tax. Obesity in Delaware is slightly above the national average and recent data shows that the growth in obesity has leveled off. Regardless, both smoking and obesity are behavioral issues and not a function of flaws in the health care system.
 
Finally, having fewer community hospital beds per 1,000 residents (DE 2.2, U.S. 2.5) means lower per capita health expenditure in Delaware. In fact, the total health care expenditures of Delaware residents exceeds the total health care expenditures to state of Delaware health providers.
 
The proposed state health plan appears to be an over the top response, at least with respect to health care expenditures per capita. And, ironically, Massachusetts, with the most comprehensive state health care plan in the nation, has the highest expenditures per capita.
 
Can we rethink this whole effort?
 
 
 
Dr. John E. Stapleford
 
President
 
Caesar Rodney Institute


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