If your news feed looks anything like ours right now, it is probably full of stories about Russia, the proposed new Pulaski County Middle School, and the Senate’s health care plan, in that order. We’re not going to touch the Russia story at this point, but we do want to take a look at how the other two stories, which seem like they are worlds apart, are actually interwoven. In previous articles we’ve discussed non-school-related items in Pulaski County’s budget such as the land use program, the NRV Regional Jail, and other development projects. We have also discussed how constructing a new middle school would increase taxes and the various financing options. This article will focus on how other external forces are putting pressure on the County school budget, and specifically on health insurance costs and mandatory retirement contributions.
One set of increasing pressures are mandates from Virginia’s General Assembly. In 2018, school districts are required to increase their contribution to the Virginia Retirement System (VRS) from 14.66% to 16.32%, which means the school system will need an additional $363,632 to cover the difference. In addition, there will be another $60,000 increase in VRS life insurance and retiree health care credits for a total of $420,000 in VRS contributions. From 2011 to 2017, even though the schools have eliminated 89 positions, or about 11%, and decreased payroll, our total VRS contributions have increased a little more than $1.6 million. All of this while the General Assembly has decreased our state funding by almost 13%.
The other pressure on the budget is through the rising costs of health insurance. From 2006 to 2016, health insurance premiums nationwide have increased 58% (20% since 2011) nationwide. These trends mean that employers such as Pulaski County Public Schools have had to substantially increase the costs paid by both themselves and by their employees. In 2016-2017, PCPS budgeted about $3.6 million for health insurance expenses, and that is with premiums that are sometimes significantly higher than those for other County employees. This represents an increase of almost $1.8 million since 2011. This increase includes higher premiums and less benefits for employees, since most now use a high deductible plan. These increased costs are a reality for our neighbors as well; from 2017 to 2018, Montgomery County is expecting its health insurance costs to increase $1.2 million and VRS contributions to increase $1 million (their wages and benefits budget is more than double Pulaski County’s $40 million at $90 million).
These increases do not represent poor decision making or planning by our county governments. Instead, they can be directly attributed to actions taken by our state and federal governments. Regardless of your opinion on the efficacy of the ACA, or its suggested replacements currently up for debate in the US Senate, none of them directly address the root cause – rising medical costs. Part of that has to do with the system we have in place, one in which roughly 25% of all costs are associated with administrative expenses (higher than almost any other country), one in which insurance companies are not incentivized to actually lower costs since they can pass on cost increases to premiums, and one in which providers are paid on the quantity of care provided instead of the quality of the outcomes. Another issue in places like Pulaski is the domination of the healthcare market by a small number of healthcare providers (in our case Carilion and Lewis-Gale) which allows them “improved commercial payer pricing.” What this means is that Carilion and Lewis-Gale, due to their market share, have far more leverage to push prices higher compared to hospitals and other healthcare providers in places like Northern Virginia where there is a far broader mix of entities that compete against one another.
While some suggest market forces could work to improve patient outcomes and decrease prices, we have experimented for almost 70 years with the current market generating forces. The result is the most expensive per person healthcare costs in the developed world by over 30%, and some of the worst health outcomes (in terms of life expectancy). It also assumes that people have the necessary information and choice to make appropriate decisions regarding healthcare. However, in Pulaski County we don’t have an urgent care facility so individuals can avoid expensive trips to the emergency room. If we only have two, or in many cases one, option for things like maternity care, surgery, and other specialists how can market forces really help people drive down their healthcare costs. Solutions like HSAs (health savings accounts) don’t help people when they are struck with true emergencies since those plans often have you pay thousands of dollars if you actually need to stay in the hospital. Thousands of dollars the vast majority of Pulaski residents do not have a choice about putting into an HSA, especially since they don’t benefit much from any tax deductions.
If we are really concerned about our neighbors on fixed incomes and their ability to pay their bills, we need to advocate for a national health care plan that will control medical costs and expand coverage.
One common argument against funding a new middle school in Pulaski County is that some members of our community can not afford a property tax increase. This is a real concern for some percentage of Pulaski County residents, especially retirees and others on a fixed income. But their economic challenges do not begin and end with an 8-cent property tax increase. In fact, even a 12-cent property tax increase pales in comparison to their soaring health care costs and other expenses that are tied to health care (which trickles down to almost everything since healthcare is one of the fastest growing costs for businesses). If we are really concerned about our neighbors on fixed incomes and their ability to pay their bills, we need to advocate for a national health care plan that will control medical costs and expand coverage. Such a plan will not only relieve pressure on the budgets of individuals in the county, but it will also free up some of the county’s budget which is currently stretched thin by skyrocketing employee health care and retirement expenses. And, not for nothing, Carilion and HCA (Lewis Gale) are two of the largest employers in the New River Valley, so more health care for more people here means more jobs and a larger tax base.
Sadly, something like a national single payer health care plan or any other plan that will meaningfully reign in the costs of health care while still meeting most people’s health care needs will take longer than a new middle school to build. In the meantime, we should look at other ways to alleviate some of the mounting pressure on the budgets of some of our neighbors who may not be able to afford a little higher property tax bill. One idea we have had includes weatherizing people’s homes to make them more energy efficient and therefore save money on their monthly electricity and gas bills. For more information on programs to help make your home more energy efficient, contact these folks. If they can’t help, let us know by emailing moc.bonkskaepnull@ofni and we will see what kind of resources we can garner to help.