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Guest column – Cutting Medicaid won’t work

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By Rob Schofield

North Carolina lawmakers have returned to Raleigh and are beginning to examine possible solutions to the expected $2 billion shortfall in the 2003-04 budget.

Because of its size, many have begun to suggest the state’s Medicaid program should be targeted for large cuts.

Here are some reasons why this would be the wrong move.

Medicaid is primarily a federal program in which state dollars are matched on a two-to-one basis.  When North Carolina cuts state outlays for Medicaid, it generally loses $2 in federal match for every $1 it cuts. 

Cutting Medicaid will harm the North Carolina economy.  For every $1 million in Medicaid spending cuts, lawmakers can expect:

* $3.64 million in lost business activity.

* $1.32 million in lost worker wages.

* 38.8 lost jobs.

Medicaid has actually been doing a better job of containing costs than private health care, according to a report last month by the nationally recognized Center on Budget and Policy Priorities. 

The vast majority of projected cost growth in Medicaid is attributable to assisting the elderly and disabled.  One cannot impose major cuts in the program without doing real damage to these two extremely vulnerable populations. 

North Carolina Medicaid runs more like a compact car than the “Cadillac” program some have alleged.  While more should be done to assure, for instance, that the pharmaceutical industry is not reaping unfair profits, lawmakers will find few “luxury” items to cut in North Carolina’s program.

A better option for state officials would be to join with their colleagues from throughout the U.S. to lobby Congress to adopt the “State Budget Relief Act.”  This bill would provide hundreds of millions of dollars in immediate assistance to the states hardest hit by the recession — $336 million in North Carolina. That’s far more than can be realistically cut from Medicaid. 

It is increasingly clear that lawmakers cannot just cut their way to a balanced budget.  Now is the time to begin to find new revenue – both federal and state – that protects both the health of the economy and the health of the people. 


Rob Schofield is a staff attorney for the N.C. Justice and Community Development Center in Raleigh.

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