State Cutbacks Could Hike Medicaid Costs

Published February 1, 2009

Cutting back state programs providing health care for the elderly or disabled—as some states are doing in response to the recession—may end up costing taxpayers more money in the long run, experts warn, as people move to more-expensive Medicaid coverage.

“The federal government matches the amount of state funds put into Medicaid programs, so putting money toward that instead of state health care programs for the elderly or disabled seems like a good idea at first, but it is not,” said Sarah Lightell, chief operating officer at the Senior Resource Alliance, a Florida-based organization that helps senior citizens access federal and state governments’ services and programs. “If the non-Medicaid state programs are eliminated, the state will end up spending more money.

“If we allow our state program money to be used as a match for Medicaid—it sounds good, you’re doubling your money—but if you lose that community care for the elderly, all those people who could have gotten some intervention” will likely switch to the more-expensive Medicaid program, Lightell said. “You will actually increase the number of people who will need Medicaid,” vastly increasing the amount of taxpayer money being spent on the program.

Medicaid More Costly

Lightell said the elderly often require only $5,000 to $10,000 per year to receive the care they need with state programs. But if they get Medicaid instead, taxpayers might end up paying $20,000 annually for the same care, and if they move into a nursing home, the cost to taxpayers could rise to $60,000 or $70,000 a year.

“It has a good financial impact to use those state revenue dollars to maintain these people in their homes at a lower cost,” Lightell said.

“Medicaid has become the single largest expenditure for many states and is now swallowing revenues that otherwise would have gone to education, transportation, public health, or other publicly funded responsibilities,” said Dennis Smith, a senior fellow at The Heritage Foundation’s Center for Health Policy Studies. “Any relief gained by the states should be the result of real reform, not of a repeat of the flawed cycle of Congressional spending.”

Avoid Medicaid Expansion

“Medicaid expansion should be avoided. In fact, eligibility for the program should be further restricted,” said Michael Cannon, a senior fellow at the Cato Institute. “Instead, states should try expanding freedom, eliminating the regulations that block free and open competition from insurers and providers licensed in other states.

“Allowing seniors and low-income families to purchase insurance and care from providers licensed in other states is essential to expanding access to coverage and care,” Cannon concluded.

Jillian Melchior ([email protected]) writes from Michigan. Maggie Goode ([email protected]) writes from Georgia.