$248 Million Medicaid ‘Mistake’

Reprinted from TelemachusLeaps.com

The Governor of North Carolina, Pat McCrory, announced another ‘mistake’ in the Medicaid projections made by the Administration of former Governor Bev Perdue last fall before the elections. Wonder if these underestimations were deliberate in the hopes of helping the Democrat candidate in the gubernatorial race?

Nah, that never happens. Right? ‘Nothing to see here, ladies and gentlemen. Move right along’.

This time, the ‘underestimation’ accounted for $135 million in the state’s largest health care program, Medicaid, for the indigent and infirm. That was on top of another $113 million or so announced earlier this year.

Here’s the question each of you has to answer today before you tell your elected leaders what you want them to do with your hard-earned taxpayer money: ‘Which is more important to fund in this state right now: Medicaid or higher education and public education in general?’

Because it is coming down to that simple proposition sure as shooting in coming years. If it hasn’t already.

Since the North Carolina state legislature is only in full session in odd-numbered years, that makes such decisions ever more critical each and every time they meet to set the budget for the next two years.

So what is it…increased millions spent for the care of the poor and long-term disabled of the state or decreased millions to educate our next generation. Or vice versa?

Let’s do a little simple back-of-the-envelope math because budgets can be very boring and dry documents. Until you realize that you are funding it all with your tax money one way or another. Then it gets real exciting very quickly.

The Medicaid budget accounts for approximately 33% of the North Carolina total state budget today. Education accounts for just over 33% of the state budget today. Those two monster line-items account for 67% of the total consolidated NC budget today, state plus federal money.

But that is skewed because so much of the Medicaid budget is paid for by what used to be known as ‘matching funds’ from DC. It is no 50/50 deal if that is what you consider ‘matching’. The federal government pays roughly $13 billion per year to support the NC Medicaid program versus the $4 billion per year paid for by state funds. A 3-1 ratio by our calculations.

You wonder why our federal debt is out-of-control? Federal ‘matching’ (sic) Medicaid payments to all federal states are a primary reason why.

The ‘real’ North Carolina budget is approximately $20 billion per year paid for by your taxes, income and sales tax mostly. NC corporate income taxes are so small, about 4% of all taxes and fees collected each year, they should be eliminated altogether. Eliminating the corporate income tax code would be an economic incentive for any CEO or entrepreneur to move business to North Carolina from California or New York, for example, without having to ‘give’ them any special economic favors to do so.

It probably costs corporations more to comply with the state tax code than the state collects from the corporate tax code in the first place.

Guess what happens when corporations move to North Carolina or entrepreneurs feel emboldened to start the next Red Hat or Quintiles or Troy & Sons Moonshine distillery in the state?

More people go off the 9.6% unemployment rolls and back into the workforce. How great is that?

The North Carolina share of the Medicaid budget is roughly $4 billion. That is the money you and I pay directly in state taxes in North Carolina. We pay the rest of the Medicaid bills indirectly through our ‘other’ federal taxes we send to Washington that THEN come back to North Carolina to pay for the very same people on Medicaid.

The tax men and women gets you coming and going, don’t they? One way or another, you are going to pay for it all.

23.1% of the NC ‘General Fund’ budget (which you and I pay) goes to Medicaid directly. 55.6% of the NC General Fund goes to pay for education in the state.

78.7% of the NC direct-paid general fund money goes to support 2 programs: education and Medicaid. Nothing else comes close. Justice and Public Safety is the only other double-digit account out there:

Recommended General Fund Budget for the 2013 – 15 Biennium, General Fund Budget, 2013-14
Education                                             $11,447,216,421                               55.6%
General Government                            $430,330,602                                 2.1%
Health and Human Services             $4,758,925,668                               23.1%
Justice and Public Safety                   $2,363,610,052                               11.5%
Natural and Economic Resources       $332,333,565                                1.6%
Transportation                                                              0                                0.0%
Capital Improvements                             $32,067,122                                0.2%
Debt Service                                             $718,109,996                                 3.5%
Reserves and Adjustments                    $519,075,178                                2.5%
Total                                                    $20,601,668,604                             100.0%

As Medicaid ‘mistakes’ keep being uncovered to the tune of $258 million, it won’t be long before the Health and Human Services account above becomes the Pac-Man of state government and chews up all available money.

It already is taking serious money from education in the state. Do you want Medicaid to also crowd out our justice, public safety and prison system next?  How about protection of our air and water? It can’t crowd out the interest we pay on our existing debt. Interest always gets paid on debt first no matter what the other needs of the state might be today.

Don’t fall back on the easiest bromide of them all: ‘We’ll just raise taxes on the rich people!’ They’ll just find other ways to shelter their income or move assets to the Cayman Islands like President Obama’s former chief of staff and now United States TREASURY Secretary Jack Lew did for many years.

You may be mad that public education isn’t getting ‘enough’ money in your estimation in the biennial budget. You may be upset that higher public education in North Carolina is being forced to tighten its belts year after year after year.*

But what you have to realize is that ‘budgets drive policy’. Always have, always will. In any walk of life. If you don’t have the money to pay for something, it is just another good idea or well-intentioned plan.

The North Carolina Medicaid budget is in dire need of big changes so it will work and do what it is intended to do: help the poorest of our citizens get the health care coverage they need.

It also must be reformed to make sure that it doesn’t continue to grow unabated and prevent our state from having the absolute best primary, secondary and higher education system humanly possible.

It can be done. But Medicaid has to be done differently than in the past.

Editor’s Note: Frank Hill is the Director of the Institute for the Public Trust in Charlotte, NC. He is former chief of staff to Congressman Alex McMillan of NC and also served on the staffs of former U.S. Senator Elizabeth Dole and the House Budget Committee.