Reform, Don't Expand, Medicaid
After years of steep increases in spending, this year Ohio's Medicaid program will actually spend less money than last year. This rare scenario has led some to call for expanding eligibility for Medicaid and eliminating cost-saving measures. These suggestions ignore the fact that this decrease is temporary and would undermine necessary cost-cutting measures that are needed to contain future growth of the program.
Medicaid spending this fiscal year is down $305 million compared to a similar period of time during the last fiscal year. That is very rare, since Medicaid spending has been increasing dramatically since 1997.
It needs to be kept in mind, however, that in a program that spends roughly $12 billion a year, $305 million only represents less than 3% of the program's spending. This decrease is much smaller than recent increases in spending on the program. For example, last year's total Medicaid spending grew by 7% and the year before it grew by almost 8%. When it is considered in perspective, $305 million in savings is not all that much.
It is not only Ohio that is seeing a drop in Medicaid spending. Other states are experiencing similar trends, or at least seeing such spending level off. Part of the reason is the growing economy. This is a large part of the reason that Ohio's Medicaid enrollment has remained flat this fiscal year.
Like many other states, Ohio has also implemented some cost-savings measures in the past few years. Because costs increased so much earlier this decade, the General Assembly passed minor restrictions on the type of services that could be used and imposed modest co-payments on some users. These, too, appear to be contributing to the dip in Medicaid spending.
Unfortunately, this dip in spending is not likely to continue into next year. The last time this happened, in 1997, only saw a one year decrease in spending. Because of this, calls to increase eligibility for the program or reverse the cost-containment actions of the General Assembly are short-sighted.
In fact, continuing to operate the Medicaid system in its current form is also short-sighted. Medicaid is a program that is unsustainable for the future, and unless Ohio undertakes serious reforms, this program will burden the state’s taxpayers with high taxes and it will be unable to serve the neediest people who rely on the system for medical care.
Some states have responded to the pressures Medicaid is placing on their budgets and have undertaken innovative reforms. Florida, for instance, is operating a pilot program in two counties that gives Medicaid users more choice as well as helps to contain costs. It has plans to take this program statewide. South Carolina is also experimenting with more market-based reforms. Other states, such as Idaho and Kentucky, are undertaken less sweeping reforms but are still taking steps to help both control costs and continue serving those who depend on the program.
With a temporary break from a steady increase in Medicaid spending, Ohio's new governor has some breathing room to work with the General Assembly to craft truly lasting Medicaid reform. Restructuring the system will ensure that this year's reduction in Medicaid spending is 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.
