With state budgets expected to collapse under the weight of Medicaid spending within a decade, states are beginning to look for ways to deal with the coming crisis. Unfortunately, many states are talking more about simple change rather than reform.
Participants at this winter’s meeting of the National Governor’s Association were vocal about the need for Medicaid reform. Yet without consensus on reform, the governors seemed to focus simply on getting more federal money or shifting some costs to the federal level. Even in Texas, budget writers are focused on getting more federal money by using state dollars to “draw down” federal funds.
The problem is simple: they want to increase funding to meet the demands of growing caseloads and increasing costs. While federal cash might serve as a short term budget fix, simply looking to Washington as a way to buoy Medicaid misses the mark.
Medicaid is in desperate need of reform.
Years of unchecked growth and expansion are now catching up with revenues, and taxpayers are paying for the generosity of misguided policies promoted by well-meaning lawmakers around the country. While the federal and state governments want to point fingers at one another over who should pay for Medicaid, the truth is that taxpayers are left holding the bag.
In 2002, state Medicaid programs covered more than 50 million people with a combined cost of $280 billion between state and federal funds. As these costs have continued to escalate, Medicaid has become the second largest item in state budgets, behind only education.
In Texas alone, the total cost for Medicaid benefits in Fiscal Year 2004 was a stunning $17 billion, consuming more than one quarter of the total state budget and costing every man, woman and child in this state more than $750 annually. The numbers grow even more staggering: one in nine Texans received Medicaid benefits in February 2004 and in state fiscal year 2002, Medicaid funded more than half of all births in Texas.
The problem is not that the federal government does not kick in enough money to support state Medicaid programs. Whether the state or federal government should pay more is really a matter of bureaucratic bickering – after all, it’s the taxpayers who ultimately foot the bill for the most expensive welfare program in our country’s history.
Even as President Bush’s budget proposal for 2006 calls for reducing Medicaid spending by $40 billion over 10 years, many state and federal lawmakers and Medicaid advocates refuse to acknowledge the writing on the wall: Medicaid spending is unsustainable.
Asking the federal government for more money without fundamental reform is the classic example of throwing good money after bad.
Lawmakers must be realistic about the need for reform and we must begin a serious debate on government’s legitimate and limited role in the health care of its people. Taxpayers simply cannot afford to let Medicaid continue on its present course, and lawmakers must not be allowed to stall the discussion on needed reforms.
Texas must look for opportunities to reform Medicaid, including ways to control cost, encourage greater personal responsibility through greater cost sharing, ensure that benefits go only to the truly needy, and strengthen the private health insurance market to prevent continued growth of the uninsured.
But in the end federal level reform will be the key. Medicaid is a growing, inflexible, complicated and bureaucratic system that prevents states from running an efficient and effective program that meets unique needs. We need principled reform at the federal level that allows for greater flexibility and state control, and that injects the system with a healthy dose of competition, patient choice and greater personal responsibility.
This is an opportunity for reform that we cannot afford to miss.
Mary Katherine Stout is the health care policy analyst for the Texas Public Policy Foundation, an Austin-based research institute.