Schmudget Blog


Community Health Centers and the State Budget

Posted by jeffc at Mar 10, 2009 12:55 PM |
Filed under: Health Care, State Budget

Deep spending cuts, such as those considered in the Governor's proposed biennial budget, would have severe effects on essential components of the state’s health care infrastructure, such as community health centers. Altogether, it is estimated that the Governor's budget would amount to a $250 to $350 million hit to community health center system. The table below summarizes the impact of selected cuts (click on it to see a larger version).

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Community Health Centers have a unique role in the state’s health infrastructure. They provide a comprehensive scope of services to Washingtonians who would otherwise have limited access to quality affordable care. And they do so without regard to their ability to pay. In fact, 32 percent of their patients in 2007 were uninsured (see graph)

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The cuts described above understate the situation faced by the community health center system because it also faces the impact of the recession. As people lose their jobs and therefore access to private health insurance, they are likely to become uninsured community health center patients. The need for these centers rises while their revenue falls.

Counting up the number of people who will directly lose coverage because of budget cuts also understates the effect on individual health care consumers. As community health centers reduce their services, it will have a detrimental impact on many more Washingtonians with lower incomes and special health needs.

"The High Cost of Subprime Lending"

Posted by jeffc at Mar 09, 2009 12:15 PM |
Filed under: Economic Security

Today, the Budget & Policy Center is releasing a new report on the "High Cost of Subprime Lending in Washington State." We will be blogging on the topic throughout the week. You can read the entire report by clicking here.

In Washington State in 2006, African-American and Hispanic homeowners were most likely to pay a higher premium for their mortgage than whites or Asians.*

The effect on household finances of having a high-cost mortgage can be significant. The cost of a $230,000 mortgage can easily be $600 higher per month, or over $200,000 over the course of a 30-year loan. In the middle of the current housing crisis, having a high-cost mortgage also suggests a higher likelihood of foreclosure.

The graph below shows the share of mortgages that were high-cost in 2006 by the race/ethnicity of the borrower. The differences were stark. Over 40 percent of the mortgages lent to African Americans and Hispanics were high-cost, compared to around 22 percent for non-Hispanic whites and Asians.

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It is unlikely that factors such as credit scores, debt-to-income ratios, and loan-to-value ratios can explain a gap of this magnitude. The blue bars show the high-cost mortgage rate for households with high incomes. Even among borrowers whose incomes were twice the area median, 39 percent of African-Americans and 37 percent of Hispanics had high-cost loans.

The difference in loan pricing suggest that the impact of further deterioration in the housing market will likely fall disproportionately on African Americans and Hispanics.

 

*The federal Home Mortgage Disclosure Act (HMDA) classifies mortgage as “high-cost” based on the loan’s annual percentage rate (APR). The APR is a better measure of the total cost than the contract interest rate alone because it includes points, fees, and other finance charges. Mortgages with APRs above designated thresholds are defined as “high-cost.”

"A Shared Vision" Part Four: Economic Security

Posted by staceys at Mar 06, 2009 10:00 AM |
Filed under: State Budget

This post is the final installment in our four-part series on a shared vision for Washington State. The series is based on the Progress Index, a framework for analyzing the state budget that was developed by the Budget & Policy Center. The Progress Index utilizes four commonly-held values: education and opportunity, thriving communities, healthy people and environment, and economic security. Last week, I wrote about healthy people and environment.

State investments in economic security ensure that people can survive difficult financial times and take steps to improve their quality of life. Families succeed when parents are secure in their ability to provide basic necessities for their children. Workers prosper when workplaces are safe and financial protections exist in cases of injury or job loss. And everyone in state benefits when people can meet their basic needs and find meaningful employment.

Even in times of prosperity, we all face the risk of job loss, disability, or family crisis. When the economy is strained, public investments in economic security matter even more. State spending on economic security fell as a share of personal income in each biennium from 1995-97 to 2005-07. Funding increased in the 2007-09 budget due to increased reimbursement rates for child care centers and a new collective agreement with family child care providers. (See graph)

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As the unemployment rate rises in Washington State due to the current economic crisis, unemployment insurance benefits play an increasingly important role in shoring up economic security in the state. Two recent stimulus efforts are directed at this benefit: the federal stimulus bill which passed last month, increases the weekly benefit amount by $25 for most claimants. The state also enacted new legislation in February increasing the weekly benefit amount by $45 and raising the weekly minimum amount for many claimants.

The combined impact will be an additional $70 per week for recipients and $480 million of additional money circulating through the state economy. Economists calculate that for every dollar of unemployment insurance issued, there is $1.64 generated in spending.

Safe and affordable housing is also an important component of economic security. Stable housing is a key variable to getting jobs, educational attainment, and health care. Research shows that quick rehousing plus supportive services can have a long-term impact on homelessness. But affordable housing is not readily available to many people living in Washington State: three-fourths of renters with incomes under $35,000 per year were paying more than 30 percent of their income in rent in 2007.

Finally, financial asset development is an important way for people with lower incomes to work towards improving their quality of life. Washington encourages lower income families to build assets through the state's Individual Development Accounts program. IDAs match the savings of lower income families to help build assets that can be used to start a business, buy a home, or pay for college.

But in other instances, the state inadvertently discourages asset building by limiting access to temporary cash benefits (TANF) based on assets the family possesses, such as a retirement account or a car used to commute to work or school. This system works against shared goals. Public programs should help people meet temporary needs without requiring them to deplete modest savings.

This post concludes our series on a shared vision for Washington State. The Budget & Policy Center will continue to use the framework outlined in the Progress Index to evaluate the state budget and analyze our long-term progress toward meeting research-based goals.

Accounting for Medicaid Spending Growth

Posted by jeffc at Mar 04, 2009 11:10 AM |

Medical assistance has been one of the fastest growing segments of the budget in the last decade, which prompts some in the state to argue for spending cuts in this area. But it is important to understand the reasons for this growth, particularly that our Medicaid investment has grown significantly to meet our commitment to care for Washington’s seniors and people with disabilities.

To understand Medicaid spending, I divided Medicaid beneficiaries into two groups: a) people over age 65 and/or with disabilities, and b) all other low income children and adults. The cost of serving these two groups is quite different. In 2005, seniors and people with disabilities made up 21 percent of Medicaid enrollees, but accounted for 61 percent of categorized spending (Figure 1). Other adults and children make up 79 percent of enrollees, but only 39 percent of spending.

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The growth in spending on medical assistance can be understood along these same lines: people over age 65 and/or with disabilities compared to all other low income children and adults. In addition, growth can be evaluated based on changes in enrollment and per-person spending. Using expenditure and enrollment data from the federal Department of Health and Human Services, I broke down nationwide Medicaid spending growth between 1995 and 2005 into the following four categories (also see Figure 2, below):

  • Enrollment of seniors and people with disabilities: Eligibility guidelines have not changed significantly for this group of people, but the population is aging, medical advancements are extending life expectancy, and economic factors have played a role. This factor explains nearly one-third of the total growth in spending.
  • Per-person spending on seniors and people with disabilities: The cost of health care and changing benefits have risen significantly for this population, contributing nearly one-third of the national growth in spending. (In Washington State, a shift from institutional care to home and community based care has controlled spending growth.)
  • Enrollment of other low income children and adults: A growing state and national commitment to expanding access to health care as well as an economic downturn led to enrollment growth, which accounted for 27 percent of total spending growth.
  • Per-person spending on other low income children and adults: The significant growth in enrollment was offset by the relatively low per-person cost. Growth in per-person spending on this group was lower than health care spending growth in the economy as a whole and only contributed 9 percent of the total spending growth.

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Altogether, nearly two-thirds of spending growth is attributable to the 21 percent of Medicaid recipients who are over age 65 and/or have disabilities. A key factor is the high cost of long-term care (including nursing homes and home health services), which accounted for one-third of total medical assistance spending in 2006.

For many people needing long-term care, options are limited. Private long-term care insurance is often prohibitively expensive. Medicare, a social insurance program that all workers pay into in order to receive health benefits upon retirement, does not provide long-term care benefits. Medicaid becomes the only option for many, although because it is only available to the poor, people have to “spend down” their resources in order to become eligible.

This problem is not limited to the current deficit. The overall population is aging, medical advancements are extending life expectancy, and the cost of health care continues to grow. In addition, the state will bear much of the responsibility for long-term care because the federal government has shifted the costs from Medicare (a federally-funded program) to Medicaid (a program in which the state must pay approximately half the cost). This affects Medicaid’s ability to meet its core mission of providing health care to the poorest Americans.

Long-term care must be comprehensively addressed. A federal modernization of Medicare is required as is a long-term financing model to ensure the affordability of long-term care for middle-income families. In the meantime, Washington policymakers must be cautious about reducing the benefits provided to these vulnerable populations.

Debunking Myths About GA-U

Posted by remyt at Mar 02, 2009 01:00 PM |

In these difficult economic times, the General Assistance-Unemployable (GA-U) program is under threat of elimination, when it is needed more than ever. Many people who receive help through GA-U were previously employed until their lives were changed by an accident or illness. It benefits everyone in the state to know that assistance is available if the same were to happen to them or someone they loved.

Leading lawmakers have insisted that Washington State is unique in providing these state-funded benefits and therefore, we can not afford the luxury of continuing the program.

They are wrong on two counts.

First, Washington is not alone in providing general assistance to disabled adults. Our analysis of national data shows that 31 states in the nation provide similar financial and medical assistance. Benefits differ among states and some provide assistance in certain counties only, but the notion that Washington stands alone in helping disabled adults is simply not true.

But what if it were? It used to be that Washington State took pride in its innovative approaches to health care and social services. We stood out as a leader on health care reform years before the nation began addressing the issue of uninsured adults and children. We continued to make strides in this arena when the Legislature passed a bill in 2007 with the impressive goal of ensuring that all children in the state have health insurance by 2010. These are the kinds of public investments that Washingtonians take pride in.

Second, the general assistance program plays a vital role in supporting the economic security and health of Washingtonians. Contrary to some opinions, not all recipients of GA-U will qualify for federal Supplemental Social Insurance (SSI). A 2006 Department of Social and Human Services report found that half of GA-U clients transitioned to SSI between 2003 and 2004. It is not adequate to assume that the federal system will absorb the needs of this population if we dismantle the state program. In addition, there is a significant backlog of applications to the SSI program that renders wait times of up to two years. If there are no state general assistance benefits available, the costs of which are eventually reimbursed to the state, low income people who have very serious health problems will likely deteriorate.

Cutting GA-U out of the state budget will not ultimately save costs to the state. It will simply divert costs to other parts of the budget that cover such areas as emergency rooms visits and public safety. A smarter approach would be to streamline our investments in the program. Our in-depth analysis of GA-U found that the state is likely to save money by providing comprehensive mental health and substance abuse treatment to GA-U clients. The state should also consider a managed care or “medical home” model of health care for everyone in the program and better screening of clients who may qualify for veteran’s benefits.

Clearly the economic crisis at hand is very serious and will require thoughtful consideration of all our options. State leaders should urge Congress to support President Obama’s plan (contained in his budget proposal) to to speed up federal administration of SSI claims, which will help move eligible Washingtonians into permanent disability benefits. But not all GA-U clients will be able to make that transition and the results would be harmful to them and costly to the state. Maintaining the GA-U program aligns us with the majority of states in the country.

"A Shared Vision" Part Three: Healthy People and Environment

Posted by staceys at Feb 27, 2009 12:00 PM |
Filed under: Health Care, State Budget

Today we continue our four-part series on the important role of public investments in our state. The series is based on the Progress Index, a framework for analyzing the state budget that was developed by the Budget & Policy Center. The Progress Index utilizes four commonly-held values: education and opportunity, thriving communities, healthy people and environment, and economic security. Last week, I wrote about thriving communities.

Good health ensures that people can take advantage of the social, economic, and civic life in their community. Likewise, a healthy environment allows people to enjoy food, water, and outdoor recreation without fear of pollution or toxins.

The challenges of achieving good health for all are increasing. As unemployment rates rise, so do the numbers of people without adequate health insurance. And even people who do have insurance can find the costs of health care to be more than they can afford. In addition, pollution in the environment threatens to overwhelm the health and safety of our air, water, land, and wildlife.

Public efforts can make a difference towards improving health and the environment in Washington State. The Budget & Policy Center has identified four research-based goals to help us focus our efforts in this area. They are:

- Protect Public and Environmental Health
- Support Families and Protect Children
- Expand Health Insurance Coverage
- Care of People with Long-Term Health Needs

Most of the state's investment in healthy people and environment goes toward expanding health insurance, caring for people with long-term health needs, and protecting children and the environment. (See graph)

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As health care costs have risen over recent decades, Washington has made significant efforts to provide health care coverage to people without private insurance. The state's Basic Health program is designed to fill the gap between public medical assistance and private insurance for lower income workers. Established in 1988, it was the first program of its kind in the nation. In 2007, state policymakers set a goal to provide health insurance to every child in the state by 2010, by passing the Cover All Kids legislation. These are investments that all Washingtonians can be proud of.

The current economic crisis facing our state poses a serious threat to our efforts to expand access to high quality health care. Not only are insurance benefits at risk, but also the availability of providers. Community Health Centers are a key component of the state health care infrastructure. They provide comprehensive health services to patients with or without health insurance. In 2008, one-third of the patients served by community health centers was uninsured. Cuts in public health insurance programs have a direct effect on community health centers, which are already strained because of economic and health care trends.

During these tough economic times, it is easy to forget the important role that state government can play in improving the quality of life for everyone. But these investments do matter. For example, the preservation and maintenance of the Cedar River Watershed has been a remarkable achievement in sustainable use of environmental resources. The watershed includes over 90,000 acres of protected forestland and is only one of six water sources in the country that does not need fabricated filtration. It provides two-thirds of King County's water supply and is also used for important environmental research.

Federal Stimulus Supports Washington's TANF program

Posted by staceys at Feb 26, 2009 12:00 PM |

The recent federal stimulus package offers states significant financial support for increased investments in economic security for vulnerable families. The American Recovery and Reinvestment Act of 2009 contains provisions for an emergency contingency fund within the Temporary Assistance to Needy Families (TANF) program. TANF is the federal program that supports state welfare programs, which in Washington is known as WorkFirst.

The new federal provisions:
- provide significant, unanticipated money to the state for TANF
- require that states experience increases in TANF caseloads and expenditures to access federal money

While the TANF block grant generally provides states with a fixed amount of money each year, the new emergency fund offers additional money to states that corresponds to increased TANF costs during the recession. The new provisions in the federal legislation are intended to help states respond to the rising need for government assistance during an economic crisis. They provide a very attractive 80 percent reimbursement for the increased costs associated with rising caseloads and innovative programs designed to assist families. (This means that for every 20 cents the state spends, it gets back 80 cents in federal assistance. In dollar terms, for every one dollar spent, Washington would receive four dollars back.)

Washington State stands to gain unanticipated extra federal dollars under this provision, but to take advantage of these funds lawmakers must resist the temptation to cut caseloads or benefits in order to deal with budget shortfalls. A state can only receive the new emergency funds for increased assistance costs if it has increased caseloads and expenditures. In other words, the program must be serving more people now than it did in 2007 - when the average monthly caseload was over 51,000 - and it is projected to do so. The Caseload Forecast Council predicted last November that the state will have close to 59,000 TANF recipients in 2011, a 14.5 percent increase over the June 2008 projection. (See graph) It is highly likely, given the escalating crisis in the economy and unemployment, that these regular assistance caseload numbers will be much higher.

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Increased caseloads in Washington State will come primarily from the rising need of vulnerable families during the current economic recession. But additional caseload growth in Washington will also come from the Career Services program that the state recently created to support families trying to work their way off assistance. The state has been planning to expand this program later this year to include working families receiving food stamps. Because expenditures on this program qualify for the 80 percent reimbursement, Washington State is well-positioned to pull in extra federal dollars through the emergency fund for previously scheduled expenditures.

As state lawmakers move forward in the budget-writing process, it is important to consider that reductions in TANF benefits for basic assistance or steps taken to reduce caseloads will mean Washington will lose out on 80 cents in additional federal funding for every dollar that gets cut. Not only would this do harm to our collective effort to provide economic security to everyone in the state, it would also run counter to the purpose of the federal stimulus bill which seeks to increase spending in the overall economy. According to the Center on Budget and Policy Priorities, a Washington D.C.-based think tank, every federal dollar pulled into the state is expected to generate $1.38 in economic activity.

For more information on the TANF provisions in the federal stimulus bill, see this paper from the CBPP. Many thanks to Liz Schott at CBPP for her assistance with this post.

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