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Fixing Medicaid So We Can Solve Teacher Pay...Among Other Things

Economics of Medicaid
Economics of Medicaid
Mercatus Center, George Mason University

For people who wonder where the money goes in the state budgets that should be going to pay our teachers more, all roads lead to one place and one place only:

Medicaid. The joint federal/state program to provide health care for lower-income and below poverty folks and families.

Now, people will say reflexively: 'There they go again! Bashing poor people for everything!'

Which is hardly the truth at all. The truth of the matter, however, is that the growth in Medicaid is squeezing every state budget across the nation into making very tough decisions on what they will be able to fund every year, up to and including teacher salaries and higher education.

Medicaid and Medicare would have already bankrupted the federal government had there been a balanced budget amendment to the US Constitution and no QE1, QE2 and QE-Infinity from the Federal Reserve to constantly bail us out of our fiscal insanity over the past 30 years.

Just making up currency out of thin air has a way of putting off the inevitable really hard decisions, doesn't it?

Consider this: Roughly 24% of every state budget in the nation today is dedicated to Medicaid coverage of its less fortunate citizens.

In 2002, Medicaid accounted for 15% of the North Carolina state budget. A 60% jump in terms of percentage of state budget allocated to Medicaid over these past 12 years.

There are estimates that show Medicaid going to 30% of state budgets in the next 5 years or so and 50% one day if it is allowed to continue to grow unabated.

Then what? Are we going to freeze teachers pay forever and pay 50% of our annual state budget on delivering Medicaid services to the poor?

There are some people who will reflexively say: 'Just raise taxes on the rich people! They should pay for it all anyway!'

That pretty much goes against the concept of a participatory democracy, doesn't it? It used to be in America not too long ago that if something was determined to be worth the common goal of our society, it also was worth being paid by everyone, not just one small subset of the society.

The imposition of higher payroll taxes for Medicaid in 1965, for example. NO wage-earner escapes what is essentially the only national 'flat-rate tax' for Medicare and Social Security, do they? You never hear anyone advocate a progressive, graduated payroll tax, do you?

State budgets are all controlled by balanced budget amendments. Thank God in Heaven!

Since every state agreed to give up their ability to coin their own currency as a precondition for joining the US and agreeing to the US Constitution, each state has always had to find ways to balance their budgets either by raising taxes or cutting spending elsewhere.

It is not easy. Or else everyone with your ability to manage things would be running to Raleigh to do this, wouldn't they?

Here's the problem for most state legislators:

They know if they raise taxes, they will frustrate economic activity and business investment in their state. Raise them too high and investment starts to leave their state and create jobs elsewhere.

New York used to have 41 Congressmen based on their population. Today, they only have 29. Think the high tax rates in NY have had anything to do with that relative exodus?
They also know that state budgets are like air-filled balloons that kids jump on at the lake in summer camp. Jump on one end with a heavy kid jumping off a 30-foot ladder and the light kid on the other end gets shot up into air at the other end like a rocket.

Same thing with budgets. Spend more on Medicaid and you will have less to spend on other state budget items. Such as teacher salaries, roads and higher education.
Fortunately, there are solutions for this unabated growth in Medicaid. One of the most important and effective is states going to Managed Care Organizations (MCOs) where states contract with private companies who enroll Medicaid patients into their network of care.

Not only do such arrangements save tons of money for state taxpayers and legislators, they provide more personalized, directed care for the very people Medicaid was supposed to provide high-quality care for in the first place.

For example, each Medicaid recipient is enrolled either voluntarily or randomly into a health program administered by the private company and that private company assigns a caseworker, if you will, to help 'manage' the health of the Medicaid person and their family.

Not just the 'health care costs' of the person or family when they get ill and need services. The 'health care' of the person.

People are taught to floss their teeth every day and brush their teeth after meals. Such attention to basic detail helps prevent the onset of many diseases since 35% of all diseases can be traced back to poor, if any, dental hygiene.

Medicaid patients are enrolled in anti-smoking programs; weight-reduction clinics and general revamping of their diets from starchy, fatty, sugary food and drinks to healthy fruits and vegetables and water.

Sounds like a program we all should be a part of, yes? We could all lose 5, 10, 15 or 50 pounds today, right?

Providing such common-sense health care solutions to Medicaid patients has the ancillary benefit of freeing up close to $1 billion per year in a state the size of North Carolina out of its $14 billion annual Medicaid budget.

The state share of that amount of annual savings is approximately $350 million. Per year. As in 'Annually'. 'From now on' when compared to the existing baseline of expected costs.

Know what the state legislature could pay for with an additional $350 million per year? A 2.3% pay raise for every public education teacher since it costs roughly $150 million for every percentage point increase in pay raises.

Or the University of North Carolina system could have an additional $350 million per year to pay for their escalated costs.

Or the Community College system of North Carolina could have $350 million more per year to pay their professors and buy new equipment to train the workforce of North Carolina for tomorrow, not yesterday.

Or provide another tax cut of some magnitude to state taxpayers so they could spend it as they wish.

Or reduce the state corporate income tax by 30% overnight and help drive North Carolina towards truly being an 'corporate income tax-free zone' where state tax credit incentives are no longer needed to attract business to NC...because there would already be zero corporate income tax to pay in the first place!

If you care about teacher pay; the UNC system, community colleges or tax cuts, we strongly urge you to get, download and read 'The Economics of Medicaid' which is simply the easiest-to-read compendium of facts and figures about Medicaid that has ever been written.

Or at least 'the easiest to read that we have read over these past 34 years'...and we have read them all from the 'Green Book' to the 'Social Security and Medicare Trust Fund Annual Reports'

Once you understand the severity of the stakes in how North Carolina deals with Medicaid, contact your state senator and representative and tell them to support a move to MCOs, managed care networks, in the state budget.

Anything less than that will not yield the savings you may want to see go to teachers or UNC instead. And then we will all still be in this quandary next year, and the next year, and the next year and then we will realize we will never fix these problems.

Ever.