Medicaid discussion will go on


For years now, legislators, policy analysts, medical providers, and lobbyists for various interest groups have been arguing about North Carolina’s Medicaid program. Whether you find this argument interesting, confusing, or boring, I have some news for you: it’s far from over.

Medicaid matters because it is one of the four major services — along with K-12 education, higher education, and the prison system — that account for the vast majority of the state budget. If you’re looking at the General Fund alone, funded by state taxes and fees, Medicaid is projected to cost $3.8 billion in the coming year, or about 17 percent of the total General Fund budget. As recently as 2010, state Medicaid spending was authorized at $2.3 billion, or 12 percent of the General Fund.

Medicaid also matters because it delivers services to a large and growing population of the disabled, the elderly, and low-income families with children. Most of the cost is attributed to “the federal government.” But that’s accounting, not economics. Medicaid as a whole is currently projected to cost $14.2 billion in the coming year, up from $10.7 billion in 2010. North Carolinians paid or will pay virtually all of this money, regardless of whether the funds go directly to Raleigh, and then out to the various service providers, or travels first through Washington (minus shipping and handling charges) before ending up back here.

Because I’m comparing past spending to a projected Medicaid budget for 2015-16, I’m using expenditures as projected at the beginning of each fiscal year. In the recent past, Medicaid costs have exceeded projections in some years and come in at or somewhat below projections in other years. Furthermore, in the immediate aftermath of the Great Recession, the federal government chipped in additional money for state Medicaid programs. A couple of years later, that extra funding went away.

These and other developments have given interest groups attempting to influence the debate about Medicaid reform plenty of opportunities to cherry-pick sets of data to make their respective cases.

The task of identifying and communicating the facts about Medicaid spending has been further complicated by the disclosure that since the implementation of a new billing system in mid-2013, North Carolina has been underpaying providers for treating low-income seniors. Now that the state is under orders to pay good on the underpayments, we’ll soon get a clearer picture of recent Medicaid costs. But right now, those costs aren’t known.

With these provisos in mind, here are some things to keep in mind:

• According to data collected by the Kaiser Family Foundation, Medicaid spending in North Carolina grew by an annual average rate of 3 percent from 2010 to 2013. That’s lower than the national average of 4 percent a year.

• However, states differ widely in Medicaid policies and medical cost trends. For example, states that expanded Medicaid under Obamacare have tended to post higher growth rates, not surprisingly. If you treat North Carolina, South Carolina, Virginia, Tennessee, and Georgia as a reference group — all neighboring states that refused Medicaid expansion — annual growth averaged 2.2 percent. South Carolina, in fact, actually posted an annual average decline in Medicaid costs of 1.7 percent during the period.

• In terms of Medicaid spending per enrollee, North Carolina is slightly higher than the regional average. Much of this reflects the fact that the cost of treating North Carolina’s disabled population is significantly higher than in other comparable states. Overall, per-enrollee Medicaid spending was 8 percent lower in South Carolina, 15 percent lower in Florida, and 24 percent lower in Georgia.

You can accept these observations and still disagree about how to proceed. You can hope to tweak North Carolina’s current case-management system for Medicaid patients. You can encourage accountable-care organizations (ACOs), based around networks of providers, to assume some financial risk for the Medicaid patients they enroll. Or you can invite full-risk managed-care organizations (MCOs) to enter the North Carolina market, as they have in most other states.

But you can’t insist that there’s nothing wrong with Medicaid, at least not if you want to maintain your credibility.

John Hood is chairman of the John Locke Foundation. Follow him @JohnHoodNC

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