In the Public Interest

The views expressed in this column are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a better-informed citizenry.

Funding the Medicaid program is a tough issue not only for Iowa officials, but also in every state in the nation. Medicaid is one of, if not the, fastest growing portion of most state budgets. If elected officials look only at how to find more and more funding for the current Medicaid program, they will eventually face a full-blown budget crisis.

Medicaid was created by Congress in 1965 to help provide health care for lower-income individuals. At that time, the program covered about four million people. Today, 53 million people are covered by Medicaid, nearly one in every six Americans. In 2004, total spending on Medicaid, which is jointly funded by the federal and state governments, was just over $300 billion, with the federal government providing just over half of that amount.

Governor Vilsack proposed a supplemental appropriations bill to provide Medicaid with an additional $60 million for this fiscal year. However, the Medicaid shortfalls will likely continue to rise in the coming fiscal years. The Governor has also proposed raising the cigarette tax to help with future Medicaid shortfalls, an idea supported by some State Legislators.

As Medicaid spending continues to rise, what is the long-term plan for funding? Will the Governor and Legislators continue to raise the cigarette tax each year? Or will they turn to raising taxes on fast food hamburgers or donuts and candy bars? One of the justifications for increasing the cigarette tax to cover Medicaid funding is that smoking increases health-care costs. The same argument will probably be made when future officials unveil their proposal for a 60-cent tax per hamburger for additional Medicaid funding.

In 2001, Florida implemented its “A Healthy State” program, targeting Medicaid recipients with chronic illnesses. Community hospitals, civic organizations, and patients’ advocate groups worked together to educate patients about their diseases and to distribute items such as blood pressure cuffs and peak flow meters to measure breathing difficulty. Patients increased their visits to a regular physician, while reducing their more-costly visits to emergency rooms for non-emergency care.

Florida’s Governor Bush has recently proposed a more far-reaching reform of the state’s Medicaid system. His plan would provide money to Medicaid recipients to allow them to purchase their own health care coverage from managed care organizations and other private medical networks. Additionally, the proposal offers an incentive for patients who comply with their doctor’s orders, have their children vaccinated, or stop smoking - those who take steps to live healthier lives. Those patients will earn money that will be deposited in a flexible spending account. That money can be used for items not covered under their health care plan, and if a recipient is able to leave the Medicaid system, the flexible spending account is theirs to keep and use for health expenses.

Whether or not this plan is passed, Florida cannot afford to do nothing. If no changes are made, Medicaid spending is projected to make up almost 60 percent of Florida’s budget in ten years. Most states will face similar budget crises as Medicaid spending continues to rise. We need to consider long-term reforms now, before the crisis arrives.

Amy K. Frantz

Senior Research Analyst

Public Interest Institute

Mt. Pleasant