Two political war horses, former Federal Reserve chairman Paul Volcker and Richard Ravitch, who helped restructure New York City after its near bankruptcy, released the final report of the task force they have led for the last three years. Their group, the State Budget Crisis Task Force, came to this conclusion:
The Task Force recognizes the difficulties inherent in government change. It also recognizes the urgency for change. The primary reason the Task Force was created is that insufficient attention is directed to the fiscal imperatives of the states. States, and the local governments they create, are charged with providing the most important domestic government services. Yet important decisions on the national level often do not consider the impact of those decisions on their ability to deliver those services.
For the most part, state governments, with their requirement to have a balanced budget every year, are better-run than the federal government, which rarely faces hard choices on prioritizing spending. I agree with the task force’s observation that the federal government does not take state needs enough into account when setting the federal budget and regulations. Medicaid spending has become the biggest expense for states, and yet they have little control over this spending.
The report states:
Medicaid is not immune from system-wide health care cost pressures. Both health care costs and utilization have increased significantly over the last three decades due to the use of expensive and lifesaving technology and improved life expectancy. In spite of these system-wide cost pressures, Medicaid has been able to contain per enrollee health care cost increases more effectively than either private market insurance or Medicare.
Medicaid must absorb the financial burden of overall health care cost increases as well as rising enrollment due to the increasing share of Americans who are low-income and must turn to the program for health care, long-term care, or both. In spite of these pressures to drive up program costs, an improving economy, strenuous state cost containment efforts, and the expiration of enhanced federal Medicaid funding under the American Recovery and Reinvestment Act have resulted in slower-than-projected program cost growth. Total cost growth dropped from 9.7 percent in 2011 to 2 percent in 2012.