Health care spending
Elias Tsapelas

Medicaid is breaking Missouri’s budget, and expanding the program would only make things worse. Every additional dollar Missouri spends on Medicaid is one that can’t be spent elsewhere. Visualizations can help illustrate the scale of the problem.

Assuming Missouri’s spending trajectory doesn’t change (a very conservative estimate given the current pandemic), here is a look at the tough road ahead for Missouri’s budget, with and without Medicaid expansion.

This is where Missouri’s tax dollars are being spent this year:

Budget graph

And here is a simple estimate of Missouri taxpayer spending on Medicaid over the next five years:

Medicaid spending

Note: These estimates use a yearly cost inflation factor of 5 percent based off the previous year’s growth. Expansion spending will likely be higher, but for simplicity, the estimate includes new enrollment of 230,000 Missourians with the state picking up 10 percent of their health care costs. The expansion spending also includes a “woodwork effect” of 50,000 new enrollees for which the state would pay the traditional 35 percent.

The table shows that Missouri’s tax revenue collections would have to increase by more than $730 million by 2024 just to cover conservative cost estimates for Medicaid expansion. Simply covering the costs means that no new funds will be available for other state programs over the same period. And any shortfalls will have to be paid for with tax increases or cuts to current programs.

It is important to note that achieving the revenue growth required to avoid these outcomes is certainly not a given. Just last year, state revenue collections increased by $98 million in total, but this year revenue collections are expected to decrease by approximately $600 million.

So, where will the money for Medicaid come from if not from increased taxes or revenue growth? Since nearly 45% percent of all general revenue spending goes toward education, it’s likely the funds will come at the expense of public schools and other state priorities. Here are a few examples illustrating the scale of Medicaid’s cost growth, and how those funds might otherwise be spent.

$730 million translates to:

- $3,500 for each child in poverty receiving a public K-12 education or

- $10,400 for every person in poverty attending a public higher education institution or

- 4,700 miles of interstate highways could be resurfaced or

- More than double the state investment in public safety measures for each of the next four years

Every year that Medicaid’s costs remain unchecked, other funding priorities will suffer. Given the current revenue shortfall, balancing the budget over the next few years is likely going to be a difficult task. Before expanding government programs, voters and policymakers should be aware of the costs and trade-offs expansion would bring.

 

About the Author

Elias - Web
Elias Tsapelas
Senior Analyst

Elias Tsapelas earned his Master of Arts in Economics from the University of Missouri in 2016. His research interests include economic development, health policy, and budget-related issues.