February 1, 2005
RALEIGH — A major cause of North Carolina’s continuing budget woes is rapid growth in Medicaid spending, where the state has some of the highest expenditures in the South, according to a new analysis published Wednesday by the John Locke Foundation.
Joseph Coletti, a fiscal policy analyst for the Raleigh-based think tank, wrote in a new Spotlight briefing paper that Medicaid spending had grown by an average of nearly 13 percent a year during the past quarter century — representing both escalating enrollment and rising costs per enrollee.
Because of another looming state budget deficit and the prospect of tighter federal funding for Medicaid, “North Carolina needs to find ways to achieve significant savings,” Coletti said. “The state’s costs are noticeably out-of-line with its neighbors and economic competitors.”
In the most recent year for which comparable data were available (2000), North Carolina’s costs per Medicaid recipient were the highest among the 11 Southern states. And a 2003 survey of physician reimbursements found that North Carolina paid the highest Medicaid rates in the region and the fifth-highest rates in the United States.
Examining the experience of nearby states with comparable populations and resources, Coletti concluded that North Carolina could save hundreds of millions of tax dollars annually by adjusting eligibility requirements, benefits, payments to providers, or some combination thereof. Specifically, if North Carolina’s percentage of residents enrolled in Medicaid (15 percent) fell over time to Virginia’s percentage (10 percent), that would represent a savings of $800 million in the state budget when fully implemented. If, instead, North Carolina focused on matching Georgia’s more limited benefits package and reduced its cost per enrollee to Georgia’s average, that would represent a state-budget savings of $630 million.
“It is hard to believe warnings of catastrophic consequences from pursuing major Medicaid savings in North Carolina, since other states have less expensive programs and yet manage to provide basic and necessary services,” Coletti said.
State policymakers need not rely simply on adjusting aspects of the current Medicaid design, he concluded. Ideas worth consideration include introducing voucher or health savings accounts into the non-disabled portion of the caseload while encouraging private long-term care insurance as an alternative to reliance on Medicaid for nursing home payments.
For more information about JLF’s new Spotlight on Medicaid spending in North Carolina, contact Coletti at 919-828-3876. The full paper is available online.