Behind the rhetoric on Ill. health care, pensions

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Associated Press

Posted on May 6, 2012 at 1:01 PM

Updated Monday, May 7 at 1:03 PM

SPRINGFIELD, Ill. (AP) — Gov. Pat Quinn recently lit a fire under the simmering questions of what Illinois will do about climbing pension and Medicaid costs. He proposed cuts in both programs and warned that inaction could mean financial disaster for the state.

The cost of providing health care for 2.7 million Illinoisans is climbing so fast the state can't keep up, he said. Bills are going unpaid, and the system will collapse entirely unless something is done. He proposed cutting services for hundreds of thousands of people, reducing payment to healthcare providers and raising cigarette taxes to fill a $2.7 billion hole.

The Chicago Democrat also wants to overhaul pensions by raising the retirement age, taking more money from public employees and reducing annual increases for retired workers. That would let the state cut back on what it is scheduled to pay for pensions in the years ahead.

Here's a closer look at some questions this raises:

Q: Could Medicaid really "collapse" if the system isn't reformed, as Quinn claims?

A: Yes, according to Laurence Msall, president of the nonpartisan Civic Federation.

That would mean doctors refusing to accept Medicaid patients, safety net hospitals closing because of unpaid bills and poor people going without health care, he said. Social service providers that serve the elderly and developmentally disabled could close their doors.

In addition, the state could face further downgrades in its credit ratings, making it difficult or impossible for the government to borrow money.

"It would be a financial disaster for anyone who does business with or interacts with the state of Illinois, not just for our most vulnerable, but also for school districts, local governments and participants in other state programs," Msall said.

Illinois has used "accounting gimmickry" to delay paying for Medicaid services, perhaps more than any other state, he said. Perhaps no other state has allowed its unpaid bills to pile as high. The pile could possibly grow $21 billion by 2017 unless the state takes action.

Q: Could fighting fraud be the answer?

A: Sen. Kirk Dillard, R-Hinsdale, has argued for years that much of Illinois' Medicaid problem could be solved by rooting out waste and abuse. He says experts believe 10 percent of Medicaid money is spent improperly, which would amount to nearly $1.5 billion in Illinois.

Unfortunately, there's little evidence to support that claim.

Dillard attributes the figure to the New York Times. He doesn't specify, but he may be referring to a series of stories in 2005 on fraud in the New York state Medicaid program. The 10 percent figure popped up for two different kinds of fraud and abuse. One was an estimate of the problem in New York's badly run Medicaid program, and the other was an estimate of losses in all health care nationwide, not just Medicaid.

Neither figure says anything about fraud and abuse in the average state Medicaid program.

A 2010 report by the National Health Care Anti-Fraud Association said a conservative estimate of fraud in the nation's total health spending — not Medicaid alone — would be 3 percent, although it also noted the FBI had put the rate at somewhere between 3 percent and 10 percent. A spokesman for the group recently put national fraud loss at "tens of billions of dollars" but wouldn't be any more specific.

The Illinois Department of Healthcare and Family Services says it's not aware of any 10 percent fraud estimate and doesn't consider it to be accurate. The department's fraud recovery each year amounts to tens of millions of dollars — nothing close to the hundreds of millions that Dillard envisions.

Q: How much ground should Illinois make up with its retirement systems?

A: Right now, the state's retirement systems have only 43 percent of the money they'll have to pay out to state employees in the decades ahead. That's a shortfall of about $83 billion.

Quinn wants to get to 100 percent funding in 30 years.

Experts differ about whether that is the appropriate goal. After all, the retirement systems don't have to pay all their obligations at once, so they don't literally need all that money available at any given time. The rate at which the state tries to catch up affects the size of potential benefit cuts or the state's annual contributions to retirement systems.

An Illinois legislative commission recommended a 90 percent goal last year. Often, 80 percent funding is cited as the dividing line between a healthy retirement system and an unhealthy one. The National Association of State Retirement Administrators reports that 100 percent funding is considered a "best practice" for public pension systems.

So the amount of pain felt by Illinois retirees and taxpayers will depend on which target state officials decide to shoot for.

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Associated Press Writer Carla K. Johnson contributed to this report from Chicago.

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