Medicaid Cuts: As Scary as They Look?
Gov. Jay Nixon has proposed $120 million in cuts for the state’s Medicaid program. There has been a lot of talk on both sides of the partisan aisle about whether this was a good move, so I decided it would be useful to try putting that number into perspective.
These numbers, though, may not matter for too long. The federal health legislation, set to go into effect in 2014, is expected to expand the Medicaid pool drastically and add at least $1.34 billion total cost over 10 years.
The Kaiser Family State Health Facts website has data on Medicaid spending per enrollee, as well as on total state expenditures. Unfortunately, the site did not have both Medicaid spending data and total state expenditure data available for the same ranges of years, so my comparisons are not perfect. They do, however, serve to illuminate the spirit of the argument. The figures for Medicaid spending per enrollee are from 2006, the state expenditure figures are from 2004, and total Medicaid spending is from 2007.
Here are some spending facts for Missouri:
| Year | Type of spending: | Amount | Rank |
|---|---|---|---|
| 2006 | Missouri Medicaid spending per enrollee | $4,387.48 | 35/51 |
| 2007 | Total Missouri Medicaid spending | $31,316,577,800 | 16/51 |
| 2004 | Total health care spending in Missouri (all sources) | $6,592,655,741 | 37/51 |
According to American Academy of Pediatrics in Missouri in 2007, the state will lose $1.60 in federal matching funds for every $1 it cuts from its state Medicaid budget. The governor proposed a $120 million cut from the Medicaid budget, so assuming that proportion does not change, we can extrapolate that to be about $312 million total from the Medicaid budget. As of September 2009, MO HealthNet had 865,477 enrollees, and $312 million averages to around $360.49 in cuts per enrollee. This means that the cut amounts to approximately 8 percent of the 2006 amount per enrollee.
So, even without a close analysis of which services are being cut, it is clear that this amount is not as alarming as might be expected. (It would place Missouri 43rd in the country on per-capita expenditure, based on the numbers from 2006.)
Frankly, I believe the real issue is how these cuts are made. Medicaid and Medicare are large black holes for resources that have the potential to swallow the state and federal budgets. It is not sustainable for them to grow continuously, and would be better if they could be shifted into the private sector via vouchers or well-designed cuts. Spending large amounts of money on Medicaid, if not spent in the right manner, can be even more detrimental than a smaller amount because it can distort the market and incentive structures. A closer analysis of how these cuts are being done is necessary to come to any distinct conclusions, but the numbers by themselves are not as frightening as some may believe.
