BuckeyeBlog

Looks like Governor Strickland is supporting Medicaid cuts and re-thinking his Medicaid expansion because the state isn’t receiving enough tax revenue.  Two years ago, when policymakers in the General Assembly almost unanimously (there was only one dissenting vote) expanded Medicaid at the request of the governor, I wrote this:

Expanding Medicaid can lead to large increases in Medicaid spending when states can least afford it –during recessions. Ohio saw this earlier this decade when Medicaid spending increased dramatically during the recent recession. Spending grew at 11 percent annually during 2001 and 2004, squeezing other budget priorities at a time when the state was seeing reduced revenue. Expanding Medicaid now will only repeat this cycle during the next recession.

Oh, so now Governor Strickland gets it, huh? I guess I was just two years too early.

I’m not a prophet, folks, I’m just someone who actually remembers the events of 2001 through 2004. State policymakers who are grappling with the state’s current deficit chose to ignore the lessons of the recession earlier this decade and expanded spending in a variety of areas, not just Medicaid. Now they are reaping the consequences of their bad decisions. I’ll wager (based on past experience) that soon Ohio’s taxpayers will be reaping the consequences of these bad decisions when these same policymakers raise taxes.

While other industries that suck from the teat of Ohio government are experiencing hard times obtaining funding, nursing homes are having their usual success in getting more of your tax money shoveled their way. Already profiting handsomely from Ohio’s Medicaid system, if House Speaker Budish has his way nursing homes will be profiting even more from their political connections. The nursing home situation in Ohio is a good example of why government-run health care won’t be the cost-effective, patient-friendly nirvana that some liberals envision.

Health care analysts generally agree that it is less expensive for taxpayers and better for many Medicaid recipients if long-term care is provided mainly in homes or community settings (the cost of home or community care is one-third of the cost of nursing home care in Ohio). However, as you may imagine, nursing home operators have a different view. It doesn’t matter to them if their services are expensive or if people don’t want to use them. If there were a free market in long-term care, business owners could not disregard consumers in this way and thrive. But when politicians are running the show, it’s pretty easy to convince them to spend your tax money for expensive care that people don’t want.

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An article in the Columbus Dispatch today touched on a few interesting issues. The main point of the article was about how much money the state’s Medicaid program (and, by extension, the state’s taxpayers) could save if the state placed as many people in home and community-based long term care instead of nursing homes. Since nursing homes are far more expensive for most people, it is likely the state could save up to $140 million a year if it just met the national average for home and community-based care.

This is something I’ve written about before. The state should do all it can to ensure that Medicaid dollars (the largest item in the state budget) are being spent in the most cost-effective way possible. The long-term care system is not living up to that standard. But as the Dispatch points out, there is a potential problem in trying to get the state to the national average for home and community-based care: there aren’t enough younger people who would be needed to provide this care. As has been discussed in other contexts, younger people aren’t staying in Ohio nor are they coming to the state. It just isn’t a place that draws people to live in it.

What this points out is that state policymakers are going to have trouble addressing the state’s rising Medicaid spending issues without addressing the more fundamental issues plaguing the state. Reforms like eliminating the income tax, instituting right-to-work legislation, universal vouchers, and the like would make the state an attractive place for younger people. Fixing long-term Medicaid care is important; fixing the underlying issues that are hurting Ohio is even more important.

As the Cleveland Plain Dealer reports, the federal government approved (in a roundabout way) Ohio’s expansion of the state government’s health insurance plan for children. Governor Strickland pushed to expand the program to families up to 300% of the federal povery level and the General Assembly gave unanimous approval last year. With the state facing a huge deficit, however, there are questions about whether this is a good use of taxpayer money.

Last year I wrote an article explaining why this type of health care expansion is a bad idea:

it is likely that a large number (perhaps a majority) will either leave or refuse to sign up for private health insurance to use the government program. A few studies have been done recently about how government health care programs “crowd out” private insurance. That is, having a free or essentially free government program leads people to choose it over private coverage. One estimate put this number as high as 60 percent — or, six out of ten children signed up either had or would have had private coverage. Others put the number between 25 percent and 50 percent. …

Unfortunately, for those children who lose private insurance and switch to government health care, they will find that the quality of their care will decrease. Patients with Medicaid often have trouble finding doctors and report they would rather be on private insurance. It makes no sense for the government to set up incentives to move to lower-quality care.

While it may sound like a good idea, the reality is that the kids being covered by this expansion don’t really need it. The vast majority already have coverage and it’s very likely that most of those covered by this program expansion would be used by families that would otherwise have insurance coverage. It’s a bad idea even if the state had a surplus. In a fiscal climate like Ohio is facing today, however, it’s ridiculous that anyone would even entertain it.

The state is having severe budget problems. There is the potential for a $7.3 billion shortfall over the next two years. That’s a significant chunk of the state’s budget. With 27% of the state budget being devoted to Medicaid, and with that program growing rapidly, it’s time the state take a serious look at reforming the program.

The Buckeye Institute’s Mike Bond has written a fine study outlining ways to reform Medicaid to both improve outcomes and slow the growth of the program. Instead of constantly expanding eligibility, the favored method of Columbus lawmakers which only increases the cost to the taxpayers, fundamental Medicaid reform is needed. Addressing this huge budget item will go a long way towards reining in Ohio’s potential deficit.

As the editors of the Cleveland Plain Dealer point out here, Medicaid’s burden on Ohio’s taxpayers is growing:

Medicaid enrollment by Ohioans has risen by 27,488 people since July 1, with roughly 16 percent of the new patients in the most expensive category (elderly, blind or disabled).

Thus, overall Medicaid spending is up sharply. From July 1 through Oct. 31, Ohio spent $3.97 billion on Medicaid. For the 2007 period, the tab was $3.62 billion. That’s a 9.7 percent increase — and a cold welcome for spenders’ letters to Santa Claus, care of Strickland’s Statehouse workshop.

This shouldn’t come as a surprise to anyone. I predicted as much here:

Expanding Medicaid can lead to large increases in Medicaid spending when states can least afford it – during recessions. Ohio saw this earlier this decade when Medicaid spending increased dramatically during the recent recession. Spending grew at 11 percent annually during 2001 and 2004, squeezing other budget priorities at a time when the state was seeing reduced revenue. Expanding Medicaid now will only repeat this cycle during the next recession.

That “next recession” is now. Of course, the expansion pushed by the governor and approved by the General Assembly last year has been stalled by the federal government. Imagine what Medicaid would be costing if it actually took effect. We may not have to imagine, as Governor Strickland is pushing the feds to approve the expansion. When Senator Obama assumes the Presidency, it’s likely that Strickland will get his wish. That means even higher Medicaid spending next year.

This article via Glenn Reynolds is a nice one about Freddie and Fannie. I’ve been being warned about this since I started as a newspaper reporter in 2000 for a small business paper. It’s a bit tricky; both that professor that bent my ear and Bainbridge are at risk of the stopped clock scenario; they’re right twice a day, etc. (How’s that for an anachronism).

The real issue Bainbridge touches on at the end: Freddie and Fannie can go to pot, as people have been predicting for 20 years or more they would. What’s really going to happen, though, is that with all the nonsense about Medicare, Medicaid, Social Security and a list that is literally endless, since our great politicians, Democrat and Republican alike, want to add to it every day, the American government itself is going to be recognized as a fraudulent bankrupt.

It’s not an if. It’s a when.