Medicaid: Latest scapegoat for anti-taxers
States are spending more as health costs rise, it’s true, but federal funding is helping out and providing benefits
Health care for the elderly and people with disabilities accounts for two-thirds of Medicaid spending, even though those groups make up just one in four Medicaid patients. (Shutterstock)
By Ted Cox
Conservatives have an increasingly large target to aim at when it comes to limiting state spending and taxes: Medicaid.
The Center Square ran a story last week showing that state spending on Medicaid was rising and eating up an increasing percentage of state budgets across the nation.
Some of the data were indeed stunning. According to the story, Ohio spent $7.3 billion on Medicaid in 2000, 19 percent of the state budget, consistent with the U.S. average. But Medicaid costs rose to $14 billion in 2009, 24 percent of the budget, and to $27 billion last year, a whopping 38 percent of the budget, double what it had been at the start of the century.
The thing is, though, no statistics exist in a vacuum, least of all health statistics.
It’s worth noting that the cost of health care has steadily risen at the same time. The United States spent just $75 billion on health care in 1970, but $1.4 trillion in 2000 and $3.5 trillion in 2017. Per capita spending went from about $5,000 in 2000 to almost $11,000 in 2017.
So health costs more than doubled, while Medicaid spending in Ohio more than tripled over the same time period, indicating that most of those rising Medicaid budget figures were simply due to the cost of doing business in the U.S. medical field.
The question is, what is that extra money being spent on?
The story cited data from the Foundation for Government Accountability, which, as the name might indicate, is not exactly enthusiastic about taxation. The story quoted the FGA study on rising Medicaid costs, saying, “Ultimately, this means fewer dollars are available for education, corrections, transportation, and other important budget priorities.”
We’d argue that the health of a state’s citizens is also an “important budget priority,” but we don’t want to tip our hand on our own political leanings.
Instead, we’ll point to the Kaiser Family Foundation, which has determined: “Almost two-thirds of all Medicaid spending is for the elderly and persons with disabilities, who make up just one in four enrollees.” As the Baby Boom generation continues to age, it’s also responsible for rising health spending. There’s no getting around that. And, harsh and uncharitable as conservatives can sometimes be, we can’t recall anyone suggesting that people with disabilities should be kicked off Medicaid, so those costs are set.
True, Medicaid expanded during this decade as a way of providing more people with health insurance under President Obama’s Affordable Care Act, but again according to the Kaiser Foundation those expansion costs were paid almost entirely by the federal government to the states that accepted them and accepted the expansion of Medicaid. In fact, Medicaid was set up and continues to operate by matching local funding and more. For instance, in 2018 Ohio paid $603 billion on Medicaid, but federal funding topped that at $616 billion.
“Medicaid is the third-largest mandatory program in the federal budget,” the Kaiser Foundation found in a study released in March, behind only Social Security and Medicare. “For states, Medicaid is a spending item, but also the largest source of federal revenues. Research shows federal dollars from Medicaid, including additional federal dollars for the ACA Medicaid expansion, has positive effects for state economies. Expansion states have greater fiscal capacity and spend more on Medicaid and education than non-expansion states.
“Because Medicaid plays a large role in both federal and state budgets and is the primary source of coverage for low-income Americans, it is a constant source of debate,” the foundation added in what might be the understatement of the year. “Efforts to repeal and replace the ACA and cap federal funding through a block grant or per capita cap were narrowly defeated in 2017, but were included in President Trump’s proposed budget for FY 2020.”
A year ago, just before being voted out of office, then-Gov. Bruce Rauner said he would have vetoed the 2014 Medicaid expansion that was part of Obamacare. He said it “basically has dramatically increased costs for taxpayers, and it has increased the number of folks who are getting health care at the expense of taxpayers rather than through working, and I think that’s the wrong trend.” But he offered no alternatives except for the Republican panacea of more jobs.
That gets back to the original Foundation for Government Accountability study. The Center Square didn’t seem to want to share this little detail, but the study is titled “The Medicaid Pac-Man: How Medicaid Is Consuming State Budgets.” It argues: “Every dollar that is diverted to Medicaid is a dollar that cannot be spent on education or public safety or infrastructure, given that the same dollar cannot be spent twice. This is the Medicaid Pac-Man.” And it goes on to advocate for work requirements for Medicaid, a proposal that has been endorsed by Rauner and President Trump.
Last year, another health study undercut that idea. Begin, again, by recalling that a quarter of Medicaid enrollees are either the elderly or people with disabilities, with a limited ability to take on work even if interested. Looking at Kansas, which was considering a work requirement, the study found that “only 11 percent of potential enrollees said they would be more likely to seek work if required to do so."
More important, the study found that imposing requirements like having a job or a health-saving account only served to sew chaos and confusion in the program, resulting in fewer people making the effort to enroll in the first place. Conservatives may see that as a plus, but keep in mind why implementing Obamacare was so important in the first place.
People without health insurance who are injured or get sick don’t just crawl off to the side of the road to pass away. They wind up hospitalized, often in an emergency room at much higher cost, and hospitals don’t eat those costs, they pass them on to patients and insurance companies in the form of higher prices for everything else — that is, when they can’t find a federal or state program to pay for them.
Like Medicaid.
Sometimes you get what you pay for, and sometimes you pay for what you get — but with added benefits. As the Kaiser report stated: “Medicaid spending flows through a state’s economy and can generate impacts greater than the original spending alone. The infusion of federal dollars into the state’s economy results in a multiplier effect, directly affecting not only the providers who received Medicaid payments for the services they provide to beneficiaries, but indirectly affecting other businesses and industries as well. More recent analyses find positive effects of the Medicaid expansion on multiple economic outcomes, despite Medicaid enrollment growth initially exceeding projections in many states. Studies show that states expanding Medicaid under the ACA have realized budget savings, revenue gains, and overall economic growth.”
Laying the issue of a state caring for its citizens entirely aside — a duty we’d argue is just as important as education or public safety or infrastructure — that still doesn’t seem like the sort of program you’d want to slash, unless of course you’re looking for some excuse, any excuse, to cut taxes.