State Medicaid Costs Continue to Outpace Education and Other Vital Services

Featured, Health Care, Pelican Site Featured — By on December 19, 2011 3:15 pm
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Implementation of federal health care law will cost Louisiana $7 billion over 10 years and constrain state reforms

Medicaid costs continued to rise in 2011, consuming a greater percentage of overall state spending. This was a result of federal stimulus money, heightened health care expenses and increased enrollment, according to the latest edition of the State Expenditure Report released by National Association of State Budget Officers (NASBO) and the National Governors Association (NGA)

However, state policymakers in Louisiana and in other states will have fewer resources available to accommodate Medicaid over the next few years as the funds made available through the American Recovery and Reinvestment Act of 2009 (ARRA) “wind down” and the economy continues to experience a sluggish recovery, the report says.

This is before any of the new health care regulations are scheduled to go into effect beginning on Jan. 1, 2014. State officials who are already under pressure to cut other vital social services in an effort to meet health care demands will be even further constrained under the new federal law formally known as the Patient Protection and Affordable Care Act (PPACA), key congressional figures and policy analysts warn.

“Even without the burdens ObamaCare will place on Medicaid, we see spending estimates rising to unprecedented levels,” Sean Riley, a legislative analyst with the American Legislative Exchange Council’s (ALEC) Health and Human Services Task Force, observes.  “Now, throw the federal health law’s constitutionally questionable Medicaid expansion scheme on top of that and it’s easy to guess what will happen to already strained state budgets.  Real Medicaid reform would include private options for beneficiaries or a variation of capped allotments and block grants to the states.  Instead, Medicaid expansion under the federal health law will only serve to make a big problem even bigger.”

In Fiscal Year 2011, Medicaid spending is estimated to be $398.6 billion, an increase of 10.1 percent over FY 2010, according to NASBO. This is almost three times the rate of higher education spending, which was 3.4 percent, and much higher than the spending on elementary and secondary education, which was 2.1 percent, and public assistance at 1.8 percent, corrections at 1.3 percent and transportation at 3 percent, the report shows.

ObamaCare calls for state Medicaid programs to be expanded to the point where they cover non-pregnant, non-elderly individuals who have an income up to 133 percent of the federal poverty level. Moreover, states are required to utilize a “five percent income disregard,” which means that Medicaid eligibility actually reaches 138 percent of the federal poverty level.

“This is why the public tide against ObamaCare continues to grow,” said Rep. John Fleming (R-La.), who is also a medical doctor. “Reports like this one confirm everything we knew when Democrats were pushing ObamaCare through. It will cost much more than they claimed and give back much less than they promised, all the while undermining the best health care system in the world. We need to repeal ObamaCare altogether.”

The figures reported by NASBO link back to a series of broken promises associated with President Obama’s health care law, Fleming said.

He described them as follows:

“The broken promise that insurance rates would go down. They went up.”

“The Class Act which was designed to help finance ObamaCare has been deemed defunct by the actuary.”

“The student loan program was nationalized to use `profits’ to finance ObamaCare, but now the president wants to begin forgiving some of the loan debt, creating another loss of taxpayer money and inability to finance ObamaCare.”

“The $500 billion that ObamaCare took from Medicare.”

“At least 12 new taxes or tax increases to help pay for ObamaCare.”

Bruce Greenstein, Louisiana’s secretary for the Department of Health and Hospitals (DHH), is concerned that the federal health law could short circuit reform efforts and innovations at the state level, and further exacerbate an already challenging fiscal climate.

“The economics behind Medicaid is counter-intuitive to what really needs to happen,” he said. “If I thought that more spending was the answer to health care that I would be open to these kind of proposals. But despite all the spending, we still get bad results.”

While he was not opposed to some of the health care expenditures connected with President Obama’s stimulus, Greenstein would prefer to have more freedom and flexibility at the local level for experimentation.

“In fairness, I would say some of the investments I saw with the stimulus money went into areas that were worthwhile,” he said. “But instead of leaning on taxpayers we should let the market decide how to best allocate our dollars.”

Assuming the U.S. Supreme Court does not overturn the individual mandate included as part of the PPACA, there is good cause to be concerned about the impact the law will have on the state, Greenstein added.

Louisiana officials estimate that implementation will cost Louisiana in excess of $7 billion over a 10-year period. Moreover, between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Although Medicaid was set up as a federal-state partnership with an eye toward splitting the cost of the program, this arrangement exists on unequal footing, Christopher Jaarda, president of the American Healthcare Education Coalition (AHEC), said. The federal government now largely sets the rules leaving the states with very little latitude, he notes.

“States have to beg the feds for flexibility in how they run Medicaid,” he said. “With the current economy, states need even more flexibility but, with ObamaCare, the feds have expanded the states financial burden under Medicaid, making it harder for states to balance their budgets.”

Moreover, the Medicaid expansion will could force “dramatic cuts” in other areas of state budgets such as primary, secondary and higher education, he added. States face a $175 billion shortfall over the next two years, according to current projections.

“Supporters of ObamaCare call it reform but it is not,” Jaarda said. “What would reform look like? Making every American better consumers of health care dollars, giving each of us skin in the game to make smart decisions and to shop for better, more affordable care. Market forces can help reduce costs, reduced costs will make insurance less expensive, which in turn will mean more people can afford coverage. ObamaCare is not reform because the law does nothing to curb costs, it makes the system less transparent, masking the cost of health care through the expansion of existing entitlements and the creation of new entitlements which simply shift the costs from one group of Americans to another.”

Kevin Mooney is the Capitol Bureau Reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

          

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    PPACA passed the Senate on December 24, 2009, by a vote of 60–39 with all Democrats and two Independents voting for, and all Republicans voting against. It passed the House of Representatives on March 21, 2010, by a vote of 219–212, with 34 Democrats and all 178 Republicans voting against the bill.