The Human Cost of Ignoring Medicaid Reform

One of the critiques that my left leaning friends often level at the political right is that Republicans are cold and heartless.

Republicans are the champions of big business and soulless capitalists, they say. They don’t care about the poor, the elderly, or the weak of society.

It may be a valid critique, if a little superficial.  Republicans do tend to find support in the business community. However, the critique ignores the other costs to our society that come when we do not adequately consider that if we spend a dollar here, we cannot spend the dollar there, the cost of government programs intended to care for the poor and needy relative to government’s other functions.

I recently saw the argument come up during a discussion about pension reform. Right now, a lot of states are facing the very real problem of budget shortfalls, in large part due to the costs associated with pension funds. The pensions funds, invested in the stock market, took huge hits during financial crisis and resulting recession, leaving them underfunded by billions. I noted in a earlier post that one report said that California was dealing with pension costs that were rising at a rate of $5 billion a year, or $1.2 million per employee. On the other hand, non-state employees–the folks paying for the pensions–had on average only $60,000 set aside for retirement.

Utah state Senator Dan Liljenquist lead out reforming Utah’s pension problem, creatively substituting 401(k) type plans for defined benefits plans. It kept benefits in place for state employees, but lifted the burden from the backs of tax payers when dips in the stock market hit investments. Lauded by the Wall Street Journal for getting ahead of the curve, other states are looking at Utah’s plan closely as they grapple with similar pension fund short-falls.

And here is where opponents of pension reform cry foul. You’re taking away what we are owed, they say.  For example:

It’s not my fault, they say.

Agreed. It was a bad bet by the legislature. But is it fair that a small segment of society reap the benefits at the cost to the rest of us? There is a very real human cost to these entitlements, and failure to compensate for those costs would be immoral.

Let’s look at Medicaid for an example of an entitlement that if unreformed will have a very real and painful human cost. Says Senator Dan Liljenquist about Medicaid’s increasing costs to the state:

“Ten years ago, Medicaid required nine percent of the state’s funds. This year Medicaid ate up 18 percent. By 2020, just nine years from now, 36 percent of our budget will be directly allocated to Medicaid. It’s like Pac-Man,” Liljenquist explains.

“Medicaid’s present growth rate is ravaging the state’s available funds and is completely unsustainable. Right now, 60 percent of the budget funds education. If that portion remains consistent through 2020, and we are committed to paying 36 percent to fund Medicaid at that time, then we are left with the remaining four percent of the state’s budget to take care of everything else.”

What does that really mean, though? What does 4% have to cover? Sen. Liljenquist goes on:

“We will either need to raise taxes substantially, lay off 20,000 school teachers, close down three of our universities, make extreme cuts to Medicaid rates or opt out of Medicaid entirely, as some other states are considering at this very minute.”

So we cut a university or two. So what? According to Utah.gov, Utah has five public universities and five colleges or technical schools. Can you imagine the impact of shutting down Weber State University, Utah State University, and Utah Valley University? Utah has one of the most educated workforces in the country, an important reason the recession has had a lesser impact on Utah than other states. Losing that workforce, or forcing Utah students to go to other states for their education, would eviscerate Utah’s competitive advantage and business environment.

How about teachers? In 2005, the last year I could find data, Utah had only 22,993 teachers (out of 45,821 employees in the public ed system…which makes me wonder: why are there more non-teachers than teachers in public education?). Cutting 20,000 teachers, then, is a non-starter. But the money has to come from somewhere…

Your suggestions? How does Utah deal with the rising costs of Medicaid–whether caused by increasing need among the poor and elderly or by expansion through the ACA–and still provide for the needs of the rest of its citizens? Roads, schools, universities, and basic government services?

There is a very real human cost to leaving these entitlements unreformed. While initially well-intentioned, entitlements like Medicaid have become a runaway train dragging budgets away from other governmental priorities that are as important to the functioning of society as caring for society’s unfortunate. If we do not reform Medicaid to compensate for these growing costs, we will see even more people finding themselves among the needy.

(h/t Utah Policy guest column “Liljenquist Tackles Medicaid Reform” by Chuck Gates)

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10 responses to “The Human Cost of Ignoring Medicaid Reform

  1. Davis Didjeridu

    Liljenquist is being knowingly deceptive about this, and your agreement belies your legal education. In Utah, Medicaid and Education (Public and Higher) funding have nothing to do with each other. Education, by Utah Constitution, is paid for by all state income taxes; it cannot be appropriated to other programs. Medicaid funding comes from federal sources and the general fund; you can cut other programs (transportation, food aid, unemployment, state parks, etc) and pay for it but, absent a constitutional amendment, you cannot pay for Medicaid with education dollars.

    • I think the point Liljenquist is making, and I don’t think it a legal one, is that absent such an amendment, there will be literally no way to pay for Medicaid increases. Whether we cut a university or 20,000 teachers, I believe he is trying to demonstrate the sheer cost of the program, unreformed, on the state and the other functions of government.

      Either way, you are completely dodging the issue: how should the state deal with the costs of Medicaid to our state?

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  3. Davis Didjeridu

    I understand the deficit Medicaid faces in Utah, but I contend it is mostly due to the unwillingness of Utah legislators to understand so many things I can’t list them here. Medicaid won’t cost us any teachers or universities ever! Article XIII(5) of the Utah Constitution says: “All revenue from taxes on intangible property or from a tax on income shall be used to support the systems of public education and higher education…”
    Lilijenquist (and you) are presenting a false choice. They are trying to appeal to the unintelligent who believe that all of the state budget comes from the same pot. It doesn’t. Lilijenquist knows this, and if he doesn’t he (even more so) doesn’t deserve to serve in the Senate.

    • Davis, the point, as I think I clearly demonstrated, was that there is a human cost to letting Medicaid continue on the path it is currently on. Whether it is cutting teachers, or roads, or parks, or social services, or whatever, if it is not controlled, it will result in the costs being distributed else where in the state’s budget.

      Each year, teachers ask for a raise. If it were so black and white as you state, dishing more money into education would not be a problem. But evidently the budget does not provide enough money to pay our admittedly under paid teachers what they are worth. I recommend you take a look at the problem rather than repeat the same, irrellivant argument.

      The problem: scarce resources and a burgeoning entitlement. Solution? (and blaming legislators, right or wrong, is not a solution–it’s whining.)

  4. In my opinion, public school administration is absolutely redonkulous and out of control. Too many administrators that get paid lots more than teachers. I think we could at least fire a few of those.

    • I did find it curious that there were more staff, administrators and aides than there were teachers… I don’t think I’m ready to pass judgement that they are unnecessary, because I just don’t know. However, I do think it of note that we have set up a system that provides incentives to individuals to leave teaching to be in administration, rather than the other way around.

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