County Medicaid Relief
Recommendation
The state should take over the county share of Medicaid within five years without a tax increase.
Background
Sales tax swap
• Sen. Tony Rand proposed that the state take over county Medicaid in exchange for a penny of the local sales tax. Counties would then have the option to add a penny to their local sales tax. This would amount to a hidden $1 billion tax increase.
• Complicating the sales tax swap is that the local sales tax is collected by the state and distributed to counties in three different ways, each with a different impact on county revenues.
Outdated Medicaid policy
• Since the 1970 creation of Medicaid in North Carolina, the state has shifted 15 percent of its program costs to counties.
• North Carolina is the last state that makes counties pay a fixed share of non-federal Medicaid costs.
Unfair to counties
• Counties have no policy control over Medicaid. Program expansions are decided at the state and federal level.
• Half of North Carolina counties spend more on Medicaid than they do on school facilities.
• Half of North Carolina Medicaid spending is for optional populations or optional services.
• On the high end, Robeson County devoted 39.1 percent of its property tax and 14.9 percent of its General Fund to Medicaid.
• On the low end, Dare County used 3.8 percent of its property tax and 1.8 percent of its General Fund for Medicaid.
Why Tax-Free County Medicaid Relief is Necessary
• State government makes the policy. It was a bad idea to stick counties with 15 percent of the state's Medicaid bill with little ability to affect the bill.
• Medicaid has room to shrink. State expansions of Medicaid as recently as 2005 have contributed to the 85 percent increase in county Medicaid costs this decade. Rolling back these expansions will help make the program more affordable, no matter who pays.
• Taxpayers are innocent bystanders. State and county officials should be able to set priorities instead of foisting the decisions on North Carolina's families. Putting the burden on those with no say in policy is where the problem started.
• The burden on counties is growing. In fact:
· County Medicaid spending grew 85 percent from FY 2000 to FY 2007 — 9 percent a year.
· Medicaid program costs for counties totaled $460 million in FY 2006.
· State legislators included $27 million in the FY 2007 budget to cap county costs.
· From 1979 to 2003, North Carolina's Medicaid enrollment more than tripled and expenditures grew by 1,859 percent, while total population grew by 45 percent.
· Medicaid took on average 6.3 percent of counties' General Fund spending and 12.6 percent of property tax revenue in FY 2006.
Analyst: Joseph Coletti
Fiscal and Health Care Policy Analyst
919/828.3876 • jcoletti-at-johnlocke.org
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