Reform, Don’t Expand, Medicaid
Should a small, temporary decrease in the Medicaid budget justify repealing money-saving measures and adding more people to the rolls? That’s a temptation that lawmakers should resist.
After years of steep increases in spending, the Ohio Medicaid program will actually spend less money this year than last. This rare year-to-year drop has led some people to call for expanding eligibility for Medicaid and eliminating some cost-saving measures.
These suggestions ignore the fact that this year’s spending is a result of unique conditions that will not continue indefinitely. They would also undermine measures that are needed to contain the program’s growth.
Right now, Medicaid spending is down $305 million compared with the same time last year. A decline like this is very rare, for Medicaid spending has been increasing dramatically since 1997. This one-year decrease does little to reverse that trend.
It needs to be kept in mind, furthermore, that in a program that spends roughly $12 billion a year, $305 million represents less than 3 percent. This one-time decrease is much smaller than recent spending increases. For example, last year’s Medicaid spending grew by 7 percent; the year before it grew by almost 8 percent. When considered in this light, $305 million in savings is not all that much.
It is not only Ohio that is seeing a drop in Medicaid spending. Other states have experienced only modest increases in spending this year, if not actual declines. Part of the reason is falling unemployment. This is also a large reason why Ohio’s Medicaid enrollment has remained flat this fiscal year.
Like many other states, Ohio introduced some cost-savings measures in the past few years. Because spending increased so much earlier this decade, the General Assembly passed minor restrictions on the type of services that could be used and it imposed modest co-payments on some users. These measures, too, appear to contribute to the dip in Medicaid spending.
Unfortunately, this decline is not likely to continue next year. The last time the Medicaid budget declined, in 1997, Ohio only saw a one-year decrease. A one-year decline is likely this time around. Given that reality, calls to repeal recent cost-containment measures or even expand Medicaid eligibility are short-sighted.
In fact, even continuing to operate Medicaid in its current form is short-sighted. Medicaid is on an unsustainable path, and unless Ohio undertakes serious reforms, the program will burden the state’s taxpayers with high taxes even while it becomes unable to serve the people who rely on it.
Some other states have responded to the pressures Medicaid is placing on their budgets by undertaking innovative reforms. Florida, for instance, is operating a pilot program that gives Medicaid users more choice as well as helps contain costs to taxpayers. It plans to take this program, currently operating in only two counties, statewide. South Carolina is also experimenting with market-based reforms. Still other states, such as Idaho and Kentucky, are undertaken less sweeping reforms, but they are still taking steps to both control costs and continue serving those who depend on the program.
Thanks to a temporary break from the steady increase in Medicaid spending, Ohio’s new governor and General Assembly have some breathing room to craft truly lasting Medicaid reform. Restructuring the system will ensure that reductions in Medicaid spending become the rule, not the exception.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
