Medicaid costs are escalating
By 2010, the Rhode Island Public Expenditure Council estimates, nearly one in five Rhode Islanders will be on Medicaid, and it’s going to cost a fortune. In fact, if nothing changes, RIPEC says, 30 percent of the state budget will go to public health insurance.
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Public school costs, meanwhile, will continue to rise faster than inflation. Baby boomers will strain the public employer pension systems, requiring major cash infusions. And the number of workers in their peak earning years will drop, increasing the burden on those who remain.
There’s no denying this, a new RIPEC report argues: Rhode Island is headed for financial trouble, and it has to prepare for “difficult financial choices.”
It can stay the course, and “muddle through the problems each year,” making small policy adjustments, using “creative revenue streams,” and shifting more costs to municipalities – and the property taxpayers who finance them.
Or armed with “considerable political will, courage and determination,” RIPEC argues, Rhode Island can take a bolder, more effective approach: impose a tax expenditure limitation (TEL), such as many other states have done, and “reform” entitlement programs, specifically Medicaid, to get costs under control.
The latter reflects a widely held view, that runaway Medicaid costs are a major threat to the federal government and especially the states. A plan before Congress would cut Medicaid by at least $10 billion, and President Bush wants deeper cuts.
TELs, for their part, have been popular among fiscal conservatives for many years, but are now under fire because both Republicans and Democrats in Colorado, long viewed as a model for its 1992 “Taxpayer Bill of Rights,” now agree that it has too severely cut resources for public services such as schools, health care and higher education.
The RIPEC report doesn’t specifically advocate a Colorado-type approach, and it acknowledges that research has shown “mixed” results from TELs, but it does support a key provision that Colorado Gov. Bill Owens now wants to lift – mandatory refunds to taxpayers of excess revenues collected in any given year.
The report also argues that discussion of a TEL could be “an opportunity to help make government more affordable, efficient and effective as well as responsive to the needs of citizens,” and it urges Gov. Donald L. Carcieri to create a public-private task force to do some of the ground work to prepare for such a measure – a review of entitlement spending.
A Carcieri spokesman wouldn’t comment directly on the RIPEC report, but said the governor “has long believed that Rhode Island has a spending problem, which creates a high tax burden,” and that to reduce that burden and create jobs, “we must get our spending problem under control.”
As for how to curb Medicaid spending, the report offers a general concept: “It is not a question of necessarily reducing entitlements,” it says. “Rather, it is about designing a social service system that maximizes taxpayers’ dollars and controlling the rate of growth in spending through cost-effective and efficient service delivery.”
But Ellen Frank, an economist at the Poverty Institute at Rhode Island College, a think tank that often disagrees with business-backed RIPEC, said the report has it wrong on two fronts: It misdiagnoses the problem, and it prescribes ineffective treatments.
Yes, Rhode Island has an aging population and all the resulting financial challenges, Frank said. Yes, it may be losing workers in their prime earning years – and high housing costs, as RIPEC noted, may be making it even harder to attract and keep them. And yes, Medicaid costs are rising rapidly, as is enrollment in Medicaid programs.
But what’s driving Medicaid expenditure growth isn’t children and families, who make up the bulk of participants, but rather seniors and the disabled, who make up 32 percent of the caseload but account for 79 percent of Medicaid expenditures, Frank said.
The fast-rising expenditures for seniors, in turn, have to do with problems in the way long-term care is delivered to Rhode Island’s oldest and most vulnerable residents, Frank said. With no better alternative to nursing homes, and no way to pay for nursing homes out of their own pockets, Frank said, seniors are deliberately depleting their assets to make themselves eligible for Medicaid, and taxpayers end up footing the bill.
“My basic issue with the RIPEC report is that it seems to point to a problem in the way health care is delivered in the United States, and that is not a problem that will be fixed with tax and expenditure limits,” Frank said. “If we want to fix the health care delivery system, we have to look at the health care delivery system.”
The rising Medicaid numbers among children and families, Frank said, also point to a problem in the health care system. Private, employer-paid health insurance is less and less available, and the plans that are offered are increasingly costly to the workers.
RIte Care, the Medicaid program that covers children and families, is already a “highly efficient” program, Frank said, less expensive than private insurance and with slower annual cost increases. So in fact, moving some workers to RIte Care might make sense financially, she said – “the question is how you’re going to pay for that, and the answer is tax revenue.”
The alternative, restricting access to Medicaid to cut costs, makes no sense, Frank said, because “then what you do is get rid of people, but you don’t get rid of their health needs.
… They end up either in emergency rooms, or increasing the burden on friends and relatives to take care of sick and disabled people. Or you just increase the amount of suffering.”
