THE 3% SOLUTION?

March 13, 2015
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THE 3% SOLUTION?

Here’s a goal for reform to tame the Medicaid monster. Let’s limit spending increases to 3%.

In 2013, the state spent 3.40 billion state dollars for Medicaid. We don’t know what actual spending will wind up being for 2014 but an 8.5% increase is authorized.

Now look at the Governor’s proposed spending increases compared to Medicaid’s base budget and what we could do with the savings if the welfare entitlement was limited to 3% growth.

2015-2017 State Medicaid Budget Appropriation

’14-’15 Authorized Budget     $3.69 billion

’15-’16 Base Budget                    $3.53 billion

’15-’16 Recommended             $3.80 billion

’16-’17 Recommended             $3.99 billion

(OSBM – appox numbers)

Growth Above 2015 Base Governor’s 3% Solution Saving

2015   –   $3.80 billion – 7.45%  vs.  $3.64 billion – 3%      [+$160 million]

2016  –   $3.99 billion – 12.91%  vs.  $3.75 billion – 3%      [+$240 million]

So over two years, slowing Medicaid spending increases to 3% a year saves $400 million from the Governor’s 13% increase.

Check out these options for programs that could be funded with the $160 million saved in 2015.

– 4% across the board teacher raise

– Reduce Community College tuition by 45%

– Reduce UNC System tuition by 11%

– Give $2000 bonus to state employees and restore tax deduction for medical expenses

– Pay interest on $5.3 billion highway/infrastructure bond at 3%

Would it be easy to cap Medicaid growth at 3% a year when we are accustomed to double digit increases? No. Real reform would be needed.

But keep this in mind. Medicaid’s free health insurance benefits in North Carolina cost 16% more than benefits in Florida ($5226/recipient in North Carolina compared to $4434 in Florida). If we could achieve just half the savings Florida has, we could save $600 million. (KFF)

The Medicaid monster is eating the budget, draining revenue needed for education and other priorities. We should use free enterprise competition between groups of medical providers and commercial managed care companies to determine who can manage the system best at the lowest cost.

If the Medicaid monster keeps getting bigger, Legislators will just be rubber stamping a budget on automatic pilot and headed for a crash.


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