RALEIGH – The governor spoke in Raleigh Tuesday about the need to make fundamental changes in the Medicaid program, which is growing by leaps and bounds, slurping up state and federal tax dollars, and making it difficult for lawmakers to craft a sensible long-term strategy on issues such as tax reform.

Speaking at the 2005 Emerging Issue Forum at NC State University, the governor went on to propose that Medicaid recipients be charged a basic copayment for routine services, as the rest of us are, and that its benefits be restructured to focus the dollars on high-priority, high-benefit interventions while not funding any and every medical request. Medicaid is, after all, a welfare program. It cannot and should not be equated with health plans that people actually pay for themselves, directly via premiums or indirectly via lower wages from employers.

For his efforts, the governor attracted the attention of demonstrators in front of NC State’s McKimmon Center. They called him heartless and cruel for proposing that the state reducing its Medicaid rolls by 323,000 people and adjusting the benefits package for those adults who remain.

To whom am I referring? If you think it’s a visiting Republican governor, you’re wrong. If you think it’s our own Mike Easley, you’re wrong with a sense of humor.

It’s Democratic Gov. Phil Bredesen of Tennessee, who inherited a fiscal mess from his Republican predecessor in 2003 that was due in large part to Medicaid. A previous Democratic governor had created the TennCare system back in the early 1990s. It expanded the state’s Medicaid program to such a degree that it came to cover about 25 percent of the entire Tennessee population. It was also a fiscal disaster. Reeling from the damage, former GOP Gov. Don Sunquist endorsed a tax increase. Bredesen, the mayor of Nashville, tacked rightward against the higher taxes in his 2002 election campaign and took the top job back for the Democrats.

So far, he seems serious about resisting general tax increases and doing something significant about TennCare/Medicaid. Good for him, and for Tennessee.

Here in North Carolina, we’re going to need fundamental changes, too. My new JLF colleague Joe Coletti has recently written a Spotlight briefing paper that puts some new numbers on an old problem. North Carolina’s Medicaid expenses are at or near the top of the list among Southern states, depending on which ones you measure. If state lawmakers and the Easley administration worked together just to reduce our costs to those of comparable states over time, the result would be savings in the hundreds of millions of dollars.

Specifically, if North Carolina reduced its enrollment rate (15 percent) to Virginia’s (10 percent), that would ratchet down the cost by $800 million. Alternatively, if we matched Georgia’s lower costs per enrollee, we’d pull the baseline cost down by $630 million. Of course, without reforms to change the underlying incentives of the program – such as moving able-bodied recipients into private plans with vouchers and encouraging wise patient decisions with health-savings accounts and cash-and-counseling programs – Medicaid spending would still grow rapidly in the future.

Tennessee’s Gov. Bredesen may not have all the right answers, but at least he’s asking the right questions.

Hood is president of the John Locke Foundation and publisher of Carolina Journal.