The Hidden Cost of Medicaid

Medicaid continues to consume a greater portion of Missouri’s budget, and the costs may be even higher than advertised. As lawmakers in Jefferson City continue putting together the state’s budget for the coming fiscal year, the version recently passed by the House includes less funding than the program typically requires.  And while I am generally supportive of measures aimed at lowering Medicaid costs, budgeting gimmicks should not be mistaken for true cost-saving reforms.

I’ve previously written about how the Medicaid program is expected to consume over 37% of Missouri’s budget this year, but in reality that number is likely closer to 40%.  When you see people writing or talking about the Medicaid budget, the numbers cited are normally those from when a given budget was originally passed. But for the last few years the legislature has been choosing to “set aside” some Medicaid funding when passing the budget, and opting to authorize those funds later in the year in what is called a supplemental.

None of this means that Medicaid recipients are at risk of being denied services, or that providers may not be paid, but simply that the program is not receiving all of its funding at the beginning of the year, as is typical for most state programs. Accurately predicting future health care costs is a notoriously difficult exercise, meaning the Medicaid program could easily require supplemental funding whether the original budget includes all the estimated costs or not. But shouldn’t we still try to accurately assess the cost of programs and budget accordingly? In order to get an accurate depiction of the program size, Missourians now need to look at end of the year Medicaid costs instead of the originally passed budget. The table below reflects how Medicaid funding increased during FY2018.

Arguments for delaying a portion of Medicaid funding are not necessarily without merit. Delaying full funding reduces the risk of appropriating more funds than the program needs, and could even incentivize the department to find ways to provide the same level of services with less money. Any efforts that put downward pressure on Medicaid costs are certainly commendable, but work to actually reform the program still needs to be done. For those of us already worried about rising Medicaid costs, it’s bad news that costs are even higher than they seem.