NCPA - National Center for Policy Analysis

MEDICAID SPENDING TO DOUBLE BY 2017

January 28, 2009

Health care spending is rising at twice the rate of national income, and this rapidly rising spending is dangerous to both the economy and individual households, says Devon Herrick, a senior fellow with the National Center for Policy Analysis.  With health care prices rising at three times the rate of inflation, spending will crowd out other expenses in the family budget. 

Currently:

  • State and federal spending on Medicaid is projected to increase by more than 7.9 percent per year over the next decade.
  • Researchers project an increase in taxpayer-funded Medicaid spending from $339 billion in 2008 to $674 billion by 2017, virtually doubling the annual cost of the program in that time.
  • It would be far better to use available Medicaid funds to help the poor acquire private coverage that they can keep when they become employed and their economic circumstances improve.
  • The states must decide how much they can spend, and then allocate to those in greatest need.

Medicaid could cost less and work more efficiently if it ran more like the pilot reforms taking place in Florida, in which lower-income families are allowed to choose a health care plan from a variety of private-sector options. 

But these comprehensive Medicaid reforms will have to take several different forms, says Herrick:

  • First, legislators need to understand that by expanding eligibility they crowd out private coverage; that means that 50 to 75 percent of new spending actually goes for people who have dropped private coverage to take advantage of free public coverage.
  • Second, we need to free the providers by deregulating the provision of care; low-cost retail clinics staffed by nurse practitioners are a great idea.

People need to control more of the dollars that pay for their own care, says Herrick.  If patients themselves don't make decisions regarding health care or other uses of their money, somebody else will have to.  And that someone will be employers, insurers or government.

Source: Aleks Karnick, "Medicaid Spending to Double by 2017, CMS Officials Say," Heartland Institute, January 2009.

 

Browse more articles on Health Issues