Expenditure group discusses health care, education spending

Matt Bittle
Posted 2/1/16

DOVER — A new report from a bipartisan group that conducted a review of state spending focuses on expenses resulting from education, corrections and health care.

The report, produced by the …

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Expenditure group discusses health care, education spending


DOVER — A new report from a bipartisan group that conducted a review of state spending focuses on expenses resulting from education, corrections and health care.

The report, produced by the Delaware Expenditure Review Committee, largely avoids broad, sweeping changes but offers suggestions and provides an overview of key cost drivers and potential savings in the state’s budget, which is set to surpass $4 billion this upcoming year.

The findings also could serve as validation for the executive branch, which recently introduced a controversial health care plan and can continue to point to the group’s work as the budget process intensifies.

Created in the fall after urgings from Republican lawmakers, the group follows an earlier revenue task force and was comprised of business, community and governmental officials, although no legislators were included.

In a statement, Gov. Jack Markell’s office pledged to continue working to spend “effectively and efficiently” and reiterated a focus on combating rising health care costs, a topic a significant portion of the report zeros in on. The group’s findings were issued Friday, one day after the unveiling of the governor’s budget, which includes proposals to increase premiums and lock future employees into a Health Savings Account in an effort to lower state employees’ medical costs.

Leading lawmakers said Monday they had not seen the report yet, but with the General Assembly’s finance committee set to start preliminary deliberations today, the findings could be cited during budget discussions this month and beyond.

Health care for state workers is a significant cost for the government, making up about 10 percent of the budget in the fiscal year that ended June 30.

According to the report, more than 122,000 people, 27 percent of whom are retired, are covered by the state. Benefits offered for current employees, even with the potential premium increases, are largely generous when compared to the private sector and even other states. On average, 91 percent of premium costs are paid for by Delaware.

According to a 2014 report produced by the Pew Charitable Trusts and the MacArthur Foundation and cited in the task force’s conclusions, the average Delaware worker paid $121 per month for him- or herself and dependents, well below the national average of $230.

Delaware also pays more on the governmental side than the average state in terms of share of premiums.

The executive branch says the changes proposed by the governor would provide substantial savings. Budget officials have also discussed incentivizing employees to be healthier and avoid unnecessary medical procedures or visits.

The committee’s conclusions include another idea put forth by the executive branch: paying for quality of care. Shifting to a “pay for value” system, part of a broader nationwide shift in health care, could produce dividends for the state.

The report says changes for retirees also could reduce spending, and it suggests as options either extending the length of service or upping the age limit at which point former employees receive full pensions. It also advises possibly requiring greater contributions from the employee side.

Another modification could focus on dependents.

“It is notable that the state does not provide an additional pension for spouses of state employees,” the report says. “In that case, why is health insurance coverage provided for retirees and spouses or eligible dependents? As an alternative to full coverage, the state could require dependents to pay the full additional premium cost.”

Efforts to locate Medicaid fraud, abuse and waste should be continued as well, the group concluded.

Education and Correction

Outside of health care, the report also examines education and corrections in depth.

For the fiscal year ended June 30, 53 percent of the budget, or $2.03 billion, was allocated for statewide personnel costs.

From March 2009 to October 2015, the 19 state’s school districts added about 1,650 employees, even as cabinet agencies are down 680 employees over the past seven years.

In the state’s current budget, one-third of authorized funding goes to the Education Department, which has seen rising enrollment numbers. According to annual data collected by the department, about 11,000 more students are in Delaware schools than seven years ago.

With that comes a need for more teachers, more transportation, more general support resources.

Complicating matters is the fact many of those students come from low-income households, according to the report.

“A factor in such growth has been the migration of students from the private/parochial school systems, which adds costs but provides little revenue growth for the state,” it says. “The relative lack of growth in household income appears to have played a role in parent’s decision-making regarding non-public schools. Whether economic recovery substantially reverses this trend is unknown.”

Delaware is one of the few states that pays for educational personnel costs rather than leaving it to the local districts. Done due to Delaware’s small size and historical precedent, this makes education a major cost driver.

One recommendation may look good on paper but seems unlikely to be enacted. The report suggests changing the senior property tax credit, which gives residents older than 65 a $500 or 50 percent break on their school property taxes. Gov. Markell proposed halving it last year, which would save the state millions annually due to its aging population and influx of retirees.

However, the proposal was rejected by lawmakers after citizen outcry and due to concerns over the impact on low-income retirees.

The other cabinet agency examined by the expenditure group is the Department of Correction, which spends the vast majority of its budget on salaries, benefits and inmate health care.

The department relies heavily on overtime — more than 750,000 such hours, costing the state about $20 million in the most recently completed fiscal year. That cost figure is nearly double what it was five years ago.

“The two growth areas within the department, health care and overtime, are related,” the report states.

“Increases in health costs are driven by the number of inmates utilizing medical services, the type and frequency of medical services and the price increases from contract medical service providers. Overtime costs are, in part, increasing due to securing outside-facility medical visits and ad-hoc inmate movement for medical reasons. The reduced headcount is also a contributor to overtime growth, as more security posts are covered by officers on overtime.”

“The inmate population is essentially flat,” the report says, although it notes the number of female prisoners is on the rise.

Using electronic technology to monitor inmates, utilizing telemedicine to treat some prisoners in-house and filling some positions like communications staff not by correctional officers but by outside personnel could reduce costs, according to the report.

It also advises sentencing reform as another possible cost-saver, which dovetails with a vision lawmakers, the courts and the executive branch already have been examining. Reducing sentences for certain nonviolent offenses and giving judges greater discretion, while maintaining public safety, could also help curtail expenses.

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