BuckeyeBlog

If you really think the health care proposals being debated in DC will cost less than $1 trillion over ten years, the Wall Street Journal today has some history of other government health care programs that should disabuse you of that notion:

The House Ways and Means Committee estimated that [Medicaid's] first-year costs would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.

Thanks in part to expansions promoted by California’s Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.

Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops. The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion. These aren’t small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.

In a Viewpoint I wrote a little while ago, I raised a concern about the burden the health care legislation making its way through Congress would impose on state taxpayers. While health insurance regulation and Medicare are receiving the bulk of the attention in this debate, all the legislation passed by House and Senate committees contain expansions of Medicaid, which pays for the health care of the poor and near-poor. Medicaid is a joint state/federal program and it is a significant portion of the state budget. Expanding this program will cost state taxpayers dearly.

The Columbus Dispatch has a story today about just how much that cost may be:

As Ohio officials try to close an $850 million budget hole, the key U.S. Senate health-care overhaul package could cost Ohio $922 million in additional Medicaid spending in the plan’s first five years.

Taxpayers should note that this figure was calculated using the assumption the federal government would pay 95% of the cost of the newly-expanded Medicaid. Currently the federal government pays 60% of Ohio’s Medicaid cost. It is highly unlikely that the feds will shoulder 95% of the cost in the final bill or, if they do, that this number will last more than a few years.

Ohio taxpayers should be aware of just how expensive this health care “reform” legislation will be to them not only at the federal level, but also at the state level.

A New York Times article on the liberal push to support President Obama’s health care “reform” mentioned this:

Other people were stoked by personal causes that seemed in some cases only peripheral to a broader societal debate.

“I’m out here if it will help one more kid get medication,” said Johari Ade-Green, 58, of Denver, who was holding a sign with a picture of her grandson, Zumante Lucero, who died in July at age 9 from complications of asthma. Her grandson had insurance under Medicaid and Social Security, she said, but through a mix-up was denied medication.

It’s undeniably tragic that this child died, especially when it sounds like his death could have been prevented. But didn’t anyone there notice that this child died while on Medicaid? That it was a mix-up on the part of government health care that killed the child? Maybe I’m biased (OK, I’m certainly biased), but it seems this child’s story is a good reason why we should oppose an expansion of government health care, especially the government option that is so near-and-dear to the hearts of the people at this rally.

President Obama has said that under his health care reform, “if you like your doctor, you keep your doctor.” While President Obama wants to create a new government-run “insurance” program, there are already government-run health care programs for the poor and elderly. Perhaps the President is unaware of it, but in one of these programs, Medicaid, some patients are having to sue the government in order to keep their own doctors:

Some desperate patients went to court in Hamilton County Monday, begging a judge for help.

They say the state won’t let them see their longtime doctors anymore.

The patients are so sick, they’re in the state’s Medicaid program for the aged, blind and disabled.

They’ve sued to keep their Health Alliance doctors and hospitals after the state’s Medicaid provider, Buckeye Insurance, dropped the Health Alliance in April.

If the government is already forcing people in government health care to choose new doctors, can we really believe that this will change under a new government health care program?

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.