VEDA SPRING CONFEERNCE
APRIL 8, 2011
Good morning. It is great to be with you here this morning in Charlottesville – a city known best for being the home of Thomas Jefferson who, while, after only two years of study, at my alma mater, William and Mary cracked under the pressure and raced home to these beautiful mountains.
It is good to see everyone here this morning as we kick off this year’s Spring Conference to discuss one of the most important issues facing our Commonwealth – and this is healthcare. But health care is such a large topic, you may wonder how it is relevant to a group of economic developers. Now after last night’s festivities, some of you may have spent the wee hours of the morning doing ab crunches while praying to the porcelain goddess – and while I commend you for that commitment to exercise and personal responsibility, what I am here today to do, in addition to being the warm up act for Mike Woods, is to provide a little context for the role of health care as it impacts the state’s economy and the way we do our policy work in Richmond.
First, let’s all understand that health care is big business. Two of the top 5 private employers in Virginia are healthcare companies – HCA and Sentara Health. HCA is in fact the largest private employer in the Richmond region – eclipsing Capital One, Wal-Mart, Philip Morris or any of the other names you see on the downtown skyscrapers.
Tens of thousands of Virginians work at hospitals, while tens of thousands more work in other health related fields. These high wage, highly skilled jobs support hundreds of thousands of other jobs across the state. One study I saw attributed nearly 1% of the state GDP to HCA alone.
Those of you in the construction world know that one of the few games in town right now is health care. Whether it is senior living facilities, medical office buildings or new and renovated hospitals, it is where the action is.
Thus, as economic developers, we need to recognize the role these companies have on our local economies and be putting into place ways to encourage their growth and to be full participants in the community.
But health care is also a major driver of state policy and legislative priorities. For those of you who don’t surrender two months of your life to walk the halls of the GAB, you cannot appreciate the full depth and breadth of the health care industry as it manifests in legislation, money, and lobbying activity. When the health committees meet, the rooms are packed, emotions run high, and millions of dollars, actually billions of dollars, are at stake. When economic development issues are heard, the room is clear except for Mike and Sandi from VEPP, Anna Mackey of DBA, either Mike or I and a few bored students on a field trip who spend most of the time texting each other.
But probably the easiest way to put it into perspective for you to reduce it to dollars and cents.
This coming fiscal year, Virginia will spend nearly $5 billion GF dollars on health care, mental health, prisoner health, etc. That’s nearly 1 of every 3 dollars of GF – tax – revenue the state collects.
In three days, Medicaid spends what we now have for the GOF for two years (and that’s at the new higher level).
In 36 hours, Medicaid spends the entire budget of VEDP. It takes only 32 hours to spend the entire DBA budget – including VJIP.
An equivalent of every penny the state collects of corporate income tax is spent on mental health and for the health care of the incarcerated.
And the trends are not good. Growth in Medicaid spending is outstripping population growth, inflation, or any other measure of growth in revenue.
And federal health care “reform” is expected to make the costs go even higher – perhaps by $2 billion more in just a few years as tens of thousands of Virginians get added to the rolls.
Does all this money mean that it is wasted? No, in fact, Virginia has one of the lowest reimbursement rates in the country and among the fewest incidents of fraud anywhere. What is does mean however is that the growing cost of government funded healthcare of crowding out spending on other priorities near and dear to us as economic developers – education, transportation and economic development spending.
Therefore, it is important of all of us to better understand this industry and how to use it to enhance, not drain, our business attraction and retention activities. We need to make health care providers be active partners in growing the economy. Many of these executives are eager to play a role in the community. We need to take advantage of that.
Turning to this year’s session, however, I think everyone will agree it was a success for economic development. More dollars and more tools were created. The Governor’s personal commitment to E.D. has made a difference. Mike will run through those accomplishments, show what I will do is talk about future trends.
This is emerging some pushback on incentives that we must watch closely. The proliferation of programs and long term commitments has some people wondering if we are doing what is best. The JLARC study of incentives could be used as a tool to beat us over the head for mistakes, all well intentioned, and deals that went bad. We should not fear that study, in fact, I think it will show that we have strict eligibility rules and ROI criteria for incentives, but it should be carefully monitored.
Because we deal with economic development on a case by case basis, it seems larger than it really is. Imagine if every time someone was put in a nursing home, there was a piece of legislation or a budget amendment. But that’s the way it is for economic development, and that’s what contributes to the confusion and frustration among legislators. We are constantly bombarding them about Project X or Company Y such that it appears the money and effort going into economic development is larger than it really is. This is a perception issue we must all tackle.
This, it requires us to do more than ever to educate (VEDA Day and Amy’s leadership – big success) about how what we do builds strong communities and creates the revenue to pay all those bills in the drawer.