This year, as it tries to close a $2 billion budget shortfall, the General Assembly must cut Medicaid, a federal-state-county matching program that brings almost as much federal money into the state as tobacco and textiles generate together.
In fiscal 2002, the year that ended last June 30, the federal government sent $4.75 billion to North Carolina to pay Medicaid fees. The tobacco industry generated $1.5 billion that year and textiles $3.8 billion.
Legislators must cut Medicaid because the state share of the program — $2.19 billion — now constitutes 15.3 percent of the state budget. A share that big cannot be ignored with such a large budget shortfall. In addition, local governments, which pay another $451 million, are begging for relief. They have little say over how Medicaid is run but get what has been a rapidly growing bill.
Put aside the human side of the cutting equation — that if you cut Medicaid spending you also reduce the health care available to the poor, elderly and disabled. For the sake of this column, just consider the economic impact of cuts made to Medicaid.
Two North Carolina cities demonstrate how much the $7.4 billion program means to the economy. Tobacco used to be the economic heart of both Winston-Salem and Durham. Both cities now generate far more economic activity from health care.
Medicaid also constitutes a major portion of the state’s health care spending. It covered 1.4 million North Carolina residents last year, that was 17 percent of the population. About three-fifths of those eligible were children and Medicaid paid for 45 percent of the births in the state.
Medicaid pays 14 percent of all in-state hospital charges. (Medicare, the program for all Americans 65 and over, pays 49 percent.) Medicaid also pays for two-thirds of the state’s 40,000 nursing home residents. Long-term care for the indigent elderly, disabled and blind takes the biggest share, by far, of Medicaid money.
Legislators know that a balanced budget is required by the constitution and they know that Medicaid spending is growing so fast that it threatens to consume state revenues. But they also know that cutbacks to their share of Medicaid spending will staunch the flow of federal money that comes directly into the state’s economy.
For every dollar that state and county governments do not spend on Medicaid, they are rejecting two dollars of federal aid that goes into the paychecks of health care workers. And when the state cuts Medicaid services and eligibility, poor people who get sick still go to the doctor. They go to emergency rooms which are bound to treat them, but which then add that unpaid cost onto their overhead expenses. Such cost-shifting leads to higher health insurance bills for all of us.
No matter which way they turn, legislators face only bad options when it comes to the Medicaid budget and the state¹s economy.
Paul O’Connor is a Raleigh columnist for the Capitol Press Association.
