Viewpoint: New strategies needed as flow of Medicare money slows

By John Stapleford
Guest Columnist

Over the last decade (2006-2016) government health insurance money has been flooding into Delaware. Medicare payments to Delaware households have jumped 82 percent and Medicaid payments 104 percent.

This can’t be sustained.

During calendar year 2016 total revenue to the Medicare Trust Fund was $290.8 billion and total expenditures were $285.4 billion. According to the projections, expenditures will soon exceed revenue and the shortfall will be made up by reducing Trust Fund assets. The Trust Fund, given current conditions,
will run dry about 2025.

In Delaware state government expenditures on Medicaid have far exceeded total general fund expenditures in recent years, and both have exceeded the growth in Delaware personal income.

At $755 million, Medicaid is the single largest line item in the State of Delaware budget. Since 2010, Medicaid spending has far outstripped state government spending on school district operations. It appears that cannibalization is occurring and there will be pushback.

Why it is happening

Delaware’s health-care industry has been living large on what seems to be a bottomless pit of government health insurance.

Over the past 10 years total earnings across private industry in Delaware have risen 17 percent. Earnings in Delaware’s health-care industry have soared 64 percent — including 38 percent for ambulatory care (the office of your physician), 85 percent for the hospital industry, and 98 percent for nursing care.

Medicare and Medicaid payments to Delaware households have risen from 82 percent of Delaware health-care industry earnings in 2006 to 96 percent in 2016.

Delaware’s health-care industry has mastered the mechanics of the government third-party payment system, and as with all third- party payments, the consumer is indifferent to rising prices.

The implications for business

The flow of Medicare and Medicaid money into Delaware will not stop, but clearly its annual growth rate of 9.5 percent cannot be sustained.

Health care is the primary stable growth industry in the state. As the industry slows, it must be proactive
in its management policies, including:
• Finding growth markets outside of Delaware
• Trimming the monthly burn rate
• Slow down workforce expansion
• Cut training, but increase cross-training
• Avoid long-term purchase agreements
• Tighter requirements on capital spending

Most likely, Delaware’s current health-care industry players will use every tool they can to prevent new health-care suppliers from entering Delaware.


Dr. John E. Stapleford is president of ECON First, which provides web-based marketing strategies based upon economic analysis and web presence research. Contact him at john@econfirst.com

Share This Post

Post Comment