(Guest Post by Matthew Ladner)
What happens when you have a large and growing elderly population in your state? One answer: you spend more money on health care. While we think of Medicare as the program for the elderly and Medicaid as a program for the poor, the reality is that the elderly often access both programs. On a per person basis, the elderly consume considerably greater Medicaid resources than either children or non-elderly adults.
Medicaid has been the biggest single program in state budgets for some time (K-12 ranks second), creeping up on a quarter of total state spending. People sometimes overlook this because Medicaid operates through a system of federal matching grants to the states, and thus much of the funding for Medicaid comes from the feds.
Of course in the end we are all local, state and federal taxpayers at the same time, meaning that federal money does not represent manna from heaven unless your only concern in life involves certifying a state budget. I’ve been examining budget data from Florida however, and even after you exclude federal funds, the trend in health vs. K-12 is clear.
Despite a healthy increase in K-12 spending, state funding of Medicaid looks set to overtake state K-12 funding in the very near future, constraining other spending. Increasingly budget battles between K-12 and Medicaid will be seen as a generational battle between the interests of the young and old. Policymakers have recognized for some time that health care inflation would spell the doom of state higher education funding (Texas lawmakers deregulated tuition in 2003 in recognition of this fact for example) but we have no reason to think that matters will rest there.
You may have heard by the way that Uncle Sam has $55 trillion in unfunded entitlement liabilities, so state lawmakers should view his ability to sustain his end of the Medicaid matching funds bargain with some suspicion. America needs major policy and practice innovations in both education and health care.