Uh oh!
We may be in for one of those good-news-is-bad-news scenarios.
The Kaiser Family Foundation’s Commission on Medicaid and the Uninsured just released a survey of Medicaid officials in all 50 states. The study found that the rate of spending growth in Medicaid declined for the fourth year in a row.
Meanwhile, the study shows that state revenues are growing, for the third year in a row.
But isn’t that what we want? Don’t we want Medicaid spending declining and state revenues increasing—as long as the increase is from economic growth rather than tax hikes?
That’s where the good-news-is-bad-news part comes in.
As the study shows, the growth in the rate of Medicaid spending increased every year from 1997, which saw a 3 percent growth in Medicaid spending, to 2002, which had a whopping 12.4 percent growth in spending. And that after a 10.3 percent increase in 2001.
The reason for the increase through most of the 1990s was . . .you guessed it!: increased state revenues—which grew at a little more than 5 percent each year from 1997 to 2000. After that, revenues began to decline as the economy took a downturn.
In 2002, a year of tremendous state fiscal scrambling, revenues declined 7.8 percent, even as Medicaid spending rose by 12.4 percent, as mentioned earlier.
That decline in state Medicaid spending along with a simultaneous rise in revenues will be too tempting for many state legislators.
Rather than saying, “We have a surplus this year; let’s return some of it to the taxpayers, to whom the money rightfully belongs anyway,” they will say something like: “We have extra money in the coffers. So how can I buy back some of the votes and good will I lost when I had to cut Medicaid services a few years ago?”
How do we know that’s what will happen? Because that’s exactly what happened in the 1990s. State revenues were growing due to a robust economy, and states across the country decided to use that money to expand Medicaid—in some states, significantly.
Then when the budget squeeze came around 2000, those legislators did nothing but complain about how Medicaid—and especially prescription drugs—was breaking the bank.
If politicians would ever learn from history, they would look for ways to reform Medicaid now, so it actually cost less money in the future. But our guess is that in a few years we will see them repeating history—again.