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June 12, 2012 11:29 AM There Are Still Good Reasons to Fix Medicaid

By Aaron Carroll

Although I’ve posted before on the fact that Medicaid does a better job than expected with respect to controlling health care spending increases, that doesn’t mean that it’s not taxing state budgets. One part of the problem is that as the economy worsens, more people need it. This means that at times when revenues are shrinking, more money is needed for Medicaid. The other part of the problem is that states, unlike the federal government, can’t run deficits. So whenever there is a recession or worse, states are truly crushed. Like now:

The problem is that many states are contending with costs that are rising even faster, as help from the federal government dwindles. Total spending has returned to levels seen before the recession.
The biggest culprit has been Medicaid. State spending on the joint federal-state health-care program for the poor surged by 20 percent this year, following a rise of 23 percent in fiscal 2011.
Officials say the increases are expected to be much smaller next year, but states are still struggling to close the gap.
Jumps in Medicaid spending have doubled the pace of growth in education spending over the past decade, the report said. Overall, Medicaid accounted for 17.4 percent of state general-fund spending last year, making it the second-largest category of spending, behind K-12 education at 35 percent.

While the federal government was picking up some of the increased spending in recent years from “stimulus” spending, that source is drying up. Even as states start to recover, they’st still being hit by an increasing Medicaid population. Enrollment went up 5.1% last year, will go up 3.3% this year, and is expected to go up 3.6% next year. Couple that with rising costs of care per beneficiary, and you’ve got a recipe for disaster.

It’s never made sense to me that caring for the elderly is a federal job, caring for the poor is a local one, and caring for the poor and elderly is split. There aren’t a lot of good reasons to treat these populations differently. This is a perfect example of why we shouldn’t.

[Cross-posted at The Incidental Economist]

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Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.
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