News: CJ Exclusives

Counties Burdened by Medicaid

Counties have no control over ever-increasing spending mandates

North Carolina is the only state that requires counties to pay a fixed percentage of Medicaid costs, and a recently released study by the John Locke Foundation study shows how much the health-care program for the poor is burdening county budgets.

Joseph Coletti, fiscal policy analyst for the Locke Foundation, wrote in a paper published Nov. 21 that counties in the state spend up to 15 percent of their general fund budgets, and up to 39 percent of their property tax revenues, to cover the cost of Medicaid. Counties have no control over these spending mandates, a fact exacerbated by Medicaid’s rapid growth within county budgets, which now claims 18 percent more of county budgets than it did five years ago.

“Medicaid costs more than school construction and building improvements in a majority of counties,” Coletti said.

According to the North Carolina Association of County Commissioners, 15 of the state’s 100 counties spend more than 10 percent of their budgets on Medicaid. Twenty of the counties, among the most rural and poor in the state, have more than 25 percent of their populations eligible for the program.

“Those counties in the east and west that have already suffered the most economically are the ones that face the highest Medicaid burdens,” Coletti said.

North Carolina is one of only eight states that administer Medicaid through counties, and the only one to require counties to cover a fixed percentage (15 percent) of Medicaid costs. The mandate eats up a large chunk of many rural counties’ property tax revenues. For example, 34 cents of Robeson County’s property tax rate was needed to pay for its share of Medicaid expenditures in 2003-04. Bertie County needed 29 cents of its property tax rate to cover those costs.

Coletti explained that while Medicaid is funded by property taxes, it is wholly separate from them.

“Medicaid grows far faster than property tax revenues, or any other revenue source,” Coletti said. “If the state does not restrain this growth, more counties will face the choice of cutting other services or raising taxes.” For example, he said, “Scotland County has already had to cut 10 percent of its workforce in the last three years.”

The General Assembly’s Blue Ribbon Commission on Medicaid Reform recommended capping and reducing counties’ contribution to Medicaid. Coletti said the state should heed the commission’s advice and gradually reduce the counties’ share of Medicaid until county payments have been eliminated.

“This can be done without increasing taxes,” Coletti said. “There is potentially $1 billion in unnecessary spending in the budget right now.”

The Association of County Commissioners has proposed a cigarette-tax increase to offset its members’ Medicaid costs. Other legislation designed to reduce or eliminate counties’ share of Medicaid costs have failed to emerge from the legislature. One bill, sponsored by Davie County Republican Rep. Julia Howard, would have capped costs at 2004-05 levels and reduced the counties costs by 20 percent over each of the next four years.