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States worried over soaring health-care costs

Baby boomers in for a rude awakening, Idaho governor says

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BIG SKY, Mont. — As 77 million baby boomers race toward retirement by 2010, Western states, as well as the nation, face a disturbing future in skyrocketing health-care costs.

The alarming trend is setting the stage for an approaching battle, according to Gov. Mike Rounds, R-S.D., who anticipates heightened competing interests fighting for languishing state funds.

Rounds and other governors already are feeling the heat. In South Dakota, 29 percent of the state's budget ends up taking care of the medical needs of individuals who have no place else to turn.

"States will have to decide whether they take their limited dollars and spend them on educational opportunities for our children or to protect and assist those individuals who have no place else to go for health care — the seniors," Rounds said.

Gov. Mike Leavitt said health-care costs are the fastest growing segment of Utah's budget, rising at about 8 percent a year. "It's the part of the budget we have the least control on," Leavitt said.

In Idaho, 20 percent of the budget ends up paying health-care costs. Gov. Dirk Kempthorne, a Republican, said financially unprepared baby boomers will be in for a rude awakening come retirement. "It's estimated that one-third of those baby boomers will go broke the first year that they have to involve themselves in long-term care," Kempthorne said.

For states that must provide Medicaid coverage for low-income individuals, the financial implications may be just as severe.

Medicaid, which also picks up costs not covered by Medicare, paid 30 percent of the cost of care for seniors and the disabled in 1984. By 1998, it had risen to 40 percent. In 2012, after the first wave of baby boomers retire, Medicaid costs will rise to 45 percent.

Because of those rising costs, states are supporting a U.S. House-passed prescription drug bill that would shift the rising costs of drug benefits of seniors to the federal government. A Senate version of the bill would require states to remain responsible for those benefits.

The implications of who pays for drug costs are high stakes. In 2002, half of all states named drug costs as the No. 1 driver of Medicaid cost growth, according to Edwin Park, senior health policy analyst for the Center on Budget and Policy Priorities, a research firm based in Washington, D.C.

In addition, Park said, Medicaid drug costs are rising 20 percent annually. The fallout of rising drug costs may lead states to cut back eligibility and benefits for low-income families and children.

Ultimately, rising health-care costs will be borne by citizens who must pay climbing insurance premiums.

"That means that the employer who is paying for health care for their employees pays more because the federal government absolutely fails to pay what they should be paying in reimbursement for those federally promised programs," Rounds said. "It's nothing more than a poorly disguised tax on the people in this country."

Republican Nebraska Gov. Mike Johanns calls the situation a "train wreck."

"This just exhausts our budget," Johanns said. "We have to find some solutions here. It just seems like this thing is going to control us if we don't get a handle on it."

E-MAIL: danderton@desnews.com