Medicaid and Why We Can’t Have Nice Things

Have you ever been in Best Buy (or, for you millennials, on Amazon) and looked at a nice 70-inch 4K Ultra HD television that made you desperate to buy one? I know I have, but the thing that stops me from splurging is the knowledge that I would like to eat this month, pay rent, and heat my home. Now, a lot of government spending isn’t like buying a nice television, but the analogy holds. It’s like what people tell their kids: Sometimes you face a choice of either buying what you want or what you really need. Wonder why we aren’t fully funding the foundation formula or why spending for corrections is relatively flat (after adjusting for inflation)? The explosive growth in Medicaid might not be the sole reason why, but it’s probably playing a big part.

For this upcoming fiscal year (which begins on July 1), the state has appropriated close to $9.4 billion to Medicaid. This includes more than $1.86 billion in general revenue (state funds that include your income taxes and most of your sales taxes). This is an increase of close to $200 million ($110 million in general revenue) over this year. That sounds like a lot of money, and it is, especially considering that Medicaid continues to take up a larger portion of the state’s budget.

The two charts below show the effects of Medicaid growth on state general revenue expenditures:

As you can see, as Medicaid grows, other programs like higher education and the foundation formula shrink as a portion of the budget. That isn’t to say that such shrinking is good or bad, but since the state has a balanced budget amendment, appropriators don’t have much choice in the matter either way.

With Medicaid costs growing, one would understand a desire to get costs under control. However, there is a concerted effort in this state to actually expand Medicaid. My colleague Patrick Ishmael has highlighted several reasons why this would be a bad idea, but solely from a budget perspective, expanding the program would be disastrous.

We need to reform Medicaid, not expand it. Ishmael has laid out ways to improve our Medicaid system. If the state can save more on Medicaid or at least stop its growth, it would grant financial flexibility to policymakers to either spend on other important items or return more money to the people who pay the bills, taxpayers.