States across the American nation are investigating the possibility of medical services designed to make certain that their citizens have medical coverage. In Massachusetts, the legislative solution to an uninsured populace was a state law requiring all adults to purchase personal health insurance by the end of the year. This is through private insurers and is not socialized. In California, the legislative debate about expanding state run healthcare continues, and in Illinois the debate about state financing for health care contributed to the longest session ever of the Illinois General Assembly.
When the General Assembly finally presented a budget to Governor Rod Blagojevich on August 10, 2007, the governor promised to use his veto powers to cut pork from the budget and to use the money to fund additional health care for Illinois children. The problem of healthcare in the United States is a grand one. An estimated 42 million Americans are on Medicare, the federally-funded health care program for the elderly and handicapped. (Medicare 2005) another 200 million Americans receive health care through Medicaid, the healthcare program jointly funded by states and the federal government for low income Americans.
(Cauchon 2005) By simple math, that means that nearly half of all Americans are already covered by some sort of single-payer, government run healthcare system. And the short answer is that it with half of American on some sort of subsidized healthcare, the cost of Medicaid healthcare program is bankrupting American governments. This paper will focus specifically on the damage done to the Illinois’ state budget by its attempts at increasing health care coverage.
According to Bruno Behrend by the end of 2006 “the State of Illinois had a backlog of almost $2 billion in Medicaid bills that cannot be paid” (Illinois Senate Republican’s view of Blago’s Budget) THESIS QUESTION: How has the cost of healthcare affected the Illinois state budget and what are the methods that the Illinois General Assembly is using to reduce those expenses? THESIS: Add into that numbers from the Census Bureau that in 2004, nearly 45 million Americans had no health insurance at all and you have a very ugly picture and an easy explanation for the move toward socialized medical care.
(Griggs 2004) Only one-third of the country actually has insurance that is not government sponsored. The remaining two third either have state sponsored healthcare or none at all. These numbers don’t even include recent initiatives in California and Illinois to make sure that all children have access to affordable healthcare. With all these people already receiving some form socialized healthcare, it seems likely that the country’s effort to reform healthcare will turn to a known entity In 2006, the cost of health care insurance to the state of Illinois was phenomenal.
The state of Illinois delayed payments to Medicaid providers for up to 6 months in an attempt to balance the state’s budget. The state’s overall finances became a problem. Illinois could no longer pay its bills on time and the state had to investigate new methods of finance to cover state expenses, not the least of which was healthcare costs. The state faces a choice each year in its medical financing, knowing that some portion of healthcare costs are reimbursed by federal programs designed to encourage the states to have local healthcare for the poor.
But the reimbursement rate varies and is never as large as the need. Further complicating the healthcare financing issues in Illinois is Governor Blagojevich’s creation of a program called “All Kids”. The program is designed to subsidize private health insurance for poor and working class families so that healthcare can be affordable and available to all Illinois children. The problem is that Blagojevich’s program placed even greater strain on the state’s budget and that meant finding a new way to finance the state budget. In his 2007 budget address, the governor called for a tax on all corporate receipts.
“ (McKibbin 2007) The tax would raise enough millions to deal with the state’s budget issues, but would have been potentially devastating to the business environment in Illinois. The General Assembly refused to follow the governor’s lead and enact the tax, but instead sent the governor a budget that does not adequately fund its expenditures. Additionally, the budget mire cost the state more than just the numbers of the balance sheet. Illinois’ Constitution calls for the end of the General Assembly’s session in non-election years to be May 31.
“ (McKibbin 2007) In particularly contentious years, when the House and Senate are split between political affiliations or when they are a different party from the governor, the budget debate has sometimes continued until early July. “ (McKibbin 2007) In 2007, Democrats controlled the House, the Senate and the governor’s mansion, but a budget bill did not even reach the governor’s desk until August 10, 2007, and on August 17, 2007, the state was still operating without a budget. On August 17, 2007, the state of Illinois still did not have a budget for the fiscal year that began July 1.
FY2008 began with a highly contentious session of the Illinois General Assembly continuing into the heat of the summer. Politically, the deadlock makes no sense. Democrats control even policy-making branch of the state government, yet the Democrats are fighting amongst themselves and not figuring out how to finance the state’s business. Illinois politicians are usually in the state capital in August, but not for work. They usually are just visiting for the Illinois State Fair. This year, House Speaker Michael Madigan finally sent them home August 10, with a budget bill being sent to the governor, but no assurance that it would be signed.
As late as a week later, Governor Blagojevich still had not signed the bill, indicating to Chicago-area public radio stations that he felt no pressure to sign the bill in a hurry. Once the state’s attorney general and comptroller agreed that state employees would be paid regardless of whether a budget agreement existed, the governor said he saw no need to rush into anything (Radio, 1). And, while the political monstrosity that is the budget agreement, or lack thereof, holds great fodder for newspapers and political scientists, the real issue of the Illinois budget crisis is determining how the state will attempt to finance its obligations.
An in-depth looks at the governor’s budget proposal made in late February, 2007, indicates the governor’s belief that tax revenue will fall short of the estimated needs of the state. Governor Blagojevich promised at that time he would not sign a budget that was not balanced. The budget submitted to him on August 10 is not balanced. But the General Assembly refused to consider the tax increase that Blagojevich proposed as a means to fund the current state budget and start whittling away at Illinois’ debt. The governor’s proposal was for a gross receipts’ tax on all Illinois businesses.
Initially he called for the tax to begin on the first dollar any Illinois’ company received, but later revised the proposal to exempt the first million dollars in receipts from the tax. Estimates from the Illinois Tax Foundation are that the increase would have raised $7. 1 billion in revenue for the state, but that the economic catastrophe caused by the single largest tax increase in the state’s history would be enormous. The reasons are simple; the governor’s proposed tax is on gross receipts not net receipts.
Therefore, if a company’s base operating costs were over a million dollars, they would be forced to pay taxes before they even reached the break even stage of operating. Before buying raw materials or paying labor costs, the company would be hit with an Illinois receipts tax. The financial consequences of the tax proposal are unimaginable. Analysis to indicate how the tax would affect the state’s economy and therefore future revenue projections will have to be included here to demonstrate the fiscal irresponsibility of the proposal.
The problem of course became that if the General Assembly rejected the financing plan set forth by the governor, it would have to determine a plan of its own. Not surprisingly, the Illinois General Assembly failed to act to determine how the Illinois state budget would be financed and failed to make appropriate budget cuts to live within the state’s means. This will almost definitely force the state into a short or long term borrowing program or the simply “let’s not pay it until the next fiscal year” financing program that it has been using for years.
The ways to make appropriate budget cuts is prescription drugs reimportation, generic biopharmaceuticals. The governors of Illinois and Minnesota Rod Blagojevich and Tim Pawlenty are two of the state’s most active proposers of treatments reimportation. “ (McKibbin 2007) Governor Blagojevich declared a complete plan in support of creation a lane for generic biopharmaceuticals in order to propose treatment to the 1. 4 million people and to propose assistance to many of Illinois people who fight daily to finance the healthcare charges under presented insurance strategy.
A lot of states possibly don’t understand how much money they pay for biopharmaceuticals. In 2006 the sale increased to 40. 3 billion dollars. “ (McKibbin 2007) At the same time as expenditure grew, several FDA commissioners began a dispute around the prospective for generic medicines. However it is necessary for the states not only to argue on this problem, but to take actual measures. To realize the seriousness of the influence of expenditure on medicines for state of Illinois, we investigated main medicines and their cost on these products. The outcomes appeared to be astounding.
“ (McKibbin 2007) “For our 227,500-member employee/retiree group, the State of Illinois spent $33. 2 million dollars for a select list of approximately 100 biopharmaceuticals during the fiscal year ending June 30, 2006. This amount (without trend) represented over 12% of the entire plan cost and is growing at an astronomical rate on both the price and utilization side of the ledger. The ingredient cost increase was 49. 9% and the plan cost per member was 50. 3%. “ (McKibbin 2007) The quantity of prescriptions for these medicines increased considerably for about 29%.
Rod Blagojevich and Tim Pawlenty consider the reimportation of prescription medicine to be a perfect method to reduce prices for drugs in the United States. Pawlenty states: “The American people deserve a better deal on their prescription medicines. As governors, it’s our job to look for innovations and new ways to bring prescription drug costs down. Everyone’s bottom line – families, businesses and units of government alike – are impacted by the outrageous and unfair cost of prescription drugs in the U. S. We need to change that. ” Blagojevich continues:
“We’re here to share ideas and develop new, innovative solutions to the growing crisis in prescription drug prices. As Governors, we’ve done everything we possibly can to reduce our state spending on prescription drugs. We have redesigned our health plans. We have negotiated with providers for lower prices. We have asked employees and retirees to share more of their prescription costs, but our fight to keep the cost of prescription drugs from overwhelming our state budgets – and from bankrupting our most vulnerable citizens – can’t stop at the border.
Re-importing American drugs from Canada is a constructive solution to a serious and growing problem. ” Blagojevich declared the outcomes of a complete investigation he conducted on the funds and viability of importing medicine for Illinois. The research showed that the government has a chance to economize $90. 7 million a year. The Illinois preparation will contain many protection measures such as limiting treatments included in the list to medicine accepted by the FDA; just medicine applied to cure lasting or chronic diseases will be on the formulary.
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