Is Medicaid Crushing Us?

Wonderful Chart Via

States are facing a budget crisis that, at times, is worse than the Federal government.  For the most part, states cannot run deficits year to year – they have to pass a balanced budget.  This gives the governors and legislatures two options.  Raising taxes or cutting spending.  Or a combination of targeted cuts and specific increases such as closing loopholes and ending subsidies for business.  States can also go the Wisconsin route – cut taxes and reduce spending while attempting to break up unions.

State budgets have been decimated by the recession and all of its constituent parts – the housing crisis, unemployment, reduced consumer spending, etc.  People are worried and politicians want to keep their jobs.  Unions have become a convenient bogey-man.  It’s easier to ask workers to take a pay cut and pay more for their health care  (note: It’s completely reasonable to ask workers to skip a COLA or pay higher premiums right now) than it is to take a corporate tax loophole away from a job-producing company (note: it’s completely reasonable to do this as well – it’s called shared sacrifice).  Unions can be vilified because they will stand up for their members and force a discussion. Elected officials are heroes when they are tough with the unions.  On the other hand, when law makers play hardball with a corporation and that corporation even threatens to leave because of higher taxes, they are blamed for being anti-business.  Which do you think most politicians are going to choose?

All options need to be on the table.  Asking workers to pay a larger percentage of their health care costs, ending corporate subsidies or closing a loophole or two will help.  Even if  a state does it all it won’t close the holes in the budget.  General fund revenues from all sources are down, and have been, since 2008.  Federal stimulus funds helped to cover losses over the past two years, but those funds are nearly gone.  ARRA funds have allowed states to push-off difficult decisions, though 39 states were forced to make mid-year budget cuts in 2010.

Then there is Medicaid, or so conventional wisdom tells us.  This vital program has been providing health insurance for low-income Americans since 1965.  It has provided access to medical and dental care for millions of Americans (the elderly, pregnant women, children, and people with disabilities) who are out of work or who are working but are still below the poverty line.  It’s also a major reason why states are facing such desperate budgets. Half of Wisconsin’s $3.6 billion deficit over the next two years is due to Medicaid.  Governor Walker knows this, which makes his push to end collective bargaining as a salve to the crisis even more flimsy.

Costs have been shared between the states and the Federal government since the inception of the program.  The recession has caused enrollment in Medicaid to shoot up as people lose their jobs and have no other option for health care.  During the recession the Federal government has increased it’s share of Medicaid payments to deal with the increased enrollment.  That additional help is ending in July and states will have to cover the increasing costs alone.

The new health care law complicates matters a bit since it imposes a “maintenance of effort” requirement on states until 2014.  In 2014, when he law goes into effect, eligibility will expand.  The federal government will cover 100% of the increase until 2020 when it drops to 90%.  In order to be eligible for this federal largesse, states must not reduce eligibility and pare the program to save money.  Republican governors, especially, feel like their hands are tied.

That all seems to be a fairly large indictment of the viability of Medicaid and the new health care law in general.  Here’s the rub, it’s not Medicaid.  It’s not Medicare.  It’s health care costs.  The cost of private insurance is rising too.  We can demagogue Medicaid and Medicare all we want, but unless we get health care costs under control, nothing that we do is going to stop the escalation of expenditures on health insurance, whether state-run or private.

Medicaid is a program that is serving a need.  It give 60 million low-income Americans access to health care each year and keeps them healthy.  Reducing eligibility or ending the program, as certain people would like to do, won’t solve our problem.  It will just send more people to the emergency room for basic health care or force them to wait until an illness becomes too severe to ignore, thus increasing the strain on the system – and the costs for everyone.  How do we rein in costs?  How do we make the system more efficient?  How do we encourage healthier lifestyles?  Those are the questions we need to answer, not how do we cut more poor Americans from the Medicaid roles to strengthen our bottom line?

In the meantime, there are a few short-term fixes.  The federal government could extend FMAP (the extra stimulus funding for Medicaid) funding for another year to allow state budgets to recover.  We could also push up the date that Medicaid payroll taxes will increase.  States could raise revenue by closing loopholes or even temporarily raising certain taxes.  There are plenty of ideas that don’t involve further weakening our strained safety net.

Finally, Governor Walker is fond of comparing his union-busting in Wisconsin to President Reagan.  He really, really want us to know that he is the re-incarnation of the air-traffic controller union smashing President.  Nice try, but it’s Governor Haley Barbour of Mississippi who takes the Reagan-cake with this apocryphal assertion while discussing Medicaid:

“We have people pull up at the pharmacy window in a BMW and say they can’t afford their co-payment.”

Welfare Queens!  Except the fact is, Medicaid recipients pay nearly 25% of health care costs out-of-pocket.  Medicaid is means-tested, so many do qualify for supplemental plans and grants.  The bottom line is, recipients are not getting a free ride in the taxpayer funmobile.  Statements like Governor’s Barbour’s do nothing to move the conversation forward, nothing to help us find solutions.  Which means he’s probably going to run for President.


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