Medicaid Busts Ohio's Budget
The Governor and General Assembly have just signed into law another two-year budget. Despite attempts to reign in spending growth, expenditures will continue to increase at almost twice the inflation rate.One of the primary causes of the growth in state government has been the Medicaid program which provides health services to lower income people. The Medicaid program now constitutes nearly 30% of the State's operating budget.
But Medicaid does not have to be a budget buster. By adopting the cost-saving techniques of some other states, Ohio could easily trim millions of dollars from the Medicaid program.
Medicaid expenditures have risen so dramatically in Ohio because the state has expanded eligibility and coverage beyond reason.
In 1995, Ohio had over 1.53 million Medicaid recipients even though only 1.29 million people fall under the poverty line. This means that at least 20%, and probably closer to 30%, of Ohio's Medicaid recipients are not poor by official standards.
In addition, all states are required by federal mandate to provide certain basic medical services in the Medicaid program, but Ohio has added many expensive extras: chiropractic care, prescription drug coverage, podiatry care, dental care, vision care, alcohol and drug counseling, and others. The Medicaid plan is much more generous than the plan offered by most private employers.
No wonder Ohio now spends over $4,000 per recipient, or $16,000 for a family of four on Medicaid!
Based on a recent study I co-authored for the Citizens for a Sound Economy Foundation in Washington, D.C. , I have calculated potential savings for Ohio's taxpayers if Ohio were to adopt the practices of more frugal states like Virginia, California and Michigan.
Both Virginia and California spend about $1,000 less per recipient than Ohio and have mostly constrained the Medicaid population to the poor. If Ohio spent as little per person and restricted eligibility like these two states, the taxpayers could save over $2 billion annually.
Although Michigan spends a bit more per recipient on Medicaid than does Ohio, Michigan has successfully avoided increasing Medicaid rolls. If Ohio restricted eligibility as much as Michigan, we could save over $400 million each year.
All three states in question must comply with the same federal regulations and mandates as Ohio, and they appear to be fulfilling their obligations under the Medicaid program even though they spend comparatively less than Ohio.
Since the Ohio Medicaid Program is about 59% funded by the federal government, $2 billion in savings would allow $1.18 billion in savings for the federal government and $820 million for Ohio taxpayers. These Medicaid savings would open the door for a 17% state income tax cut in Ohio. Alternatively, the savings from serious Medicaid reform could be directed to meet the state's apparent need to increase funding for education to comply with the Ohio Supreme Court's school equity decision without raising additional taxes.
The answers to our health care problems do not lie in increasing the dependency of Ohioans on government health care. Ohio should strongly consider limiting coverage to the poor and rolling back coverage options not mandated by federal law. If the state really wants to help working, uninsured people it should consider direct health-care vouchers or Medical Savings Accounts as the best ways to foster self-reliance and to control taxpayer costs.
Robert A. Lawson, Ph.D. is Professor of Economics and George H. Moor Chair at Capital University in Columbus, Ohio and a Senior Fellow with The Buckeye Institute.
