May 1, 2015

Should the Legislature fix Medicaid or let the UNC bureaucracy keep raising tuition?

That question is pertinent given a new report from UVA and Moody’s Analytics showing the impact of growing state spending on entitlements compared to shrinking spending on other priorities like higher education.

The study says Medicaid is crowding out higher education. “While results vary by state, the study notes that over the past several decades, the growth in state funding for discretionary spending categories has been squeezed at an alarming rate. Mandatory spending programs, specifically Medicaid, are requiring more and more state funds, leaving fewer and fewer dollars for other programs. Higher education funding has borne the brunt of much of this crowding out.” (Miller Center at UVA)

Let’s focus on North Carolina. Moody’s reports North Carolina Medicaid spending was $4.5 billion in 2013 or 14.9% of the budget. They report Medicaid spending of $4.8 billion or 15.5% of the budget in 2014. Based on their long term model of economic growth, healthcare spending, enrollment trends and other factors, Moody’s projects Medicaid will take $8.5 billion in 2024 or 16.7% of the budget.

Moody’s then looks at the trend in state spending for higher education and how it will fall if the Medicaid entitlement keeps swallowing ever bigger pieces of the budget pie. They project higher education’s share of the budget will drop from 17.6% in 2013 to 17.1% in 2024. That drop of one half of one percentage point may not seem like much. But in the context of Moody’s projection of a $50 billion state budget in 2024, it translates into $250 million cut out of higher education.

And what does a $250 million cut in higher education equal? It equals free tuition for about 17,000 students at UNC Chapel Hill. That 17,000 student number is based on recent tuition increase trends nearly doubling tuition by 2024. That drastic increase would not have to happen if UNC undertook real cost saving reform. And the $250 million cut wouldn’t have to happen if Medicaid spending was brought under control.

The uncontrolled increase in the Medicaid entitlement is squeezing out other priorities. Higher education is just one of them.

Medicaid up. College aid down. That’s the track we’re on

Anyone for doing something real like passing Medicaid managed care?