Friday, July 8, 2011

The Opportunity Cost of Medicaid Mandates

The Wall Street Journal yesterday published an article recapping state legislatures’ activity, as many legislative sessions have concluded and most state fiscal years began last Friday.  Two graphs merit attention, and are pasted below.  The first shows that Medicaid comprises an average 22% of state budgets, followed by K-12 education (21%) and higher education (10%).  Yet as the second graph summarizing midyear budget cuts during the last fiscal year demonstrates, both K-12 and higher education each bore more than twice as many budget cuts as Medicaid, even though Medicaid comprises a larger share of the average state’s budget.

Each state’s budget and circumstances are unique – in some situations, significantly cutting education spending may make more sense than reducing Medicaid expenditures – but these two charts collectively demonstrate how the Medicaid mandates in the “stimulus” and Obamacare are forcing states to choose health care entitlement spending over schools and universities.  Remember too that at a time when states face budget deficits totaling a collective $175 billion, the health care law is imposing new unfunded mandates of at least $118 billion.  So the kinds of difficult choices reflected in the below graphs – and their impact on students – are likely to continue, and even possibly accelerate, in the years ahead.