RALEIGH — As negotations, confusing and no doubt frustrating, continue in the state capital over a 2004-05 budget plan, a major theme in the coverage has been whether the North Carolina House will restore some of Gov. Mike Easley’s cuts in health and human services, whether Easley can fend off proposed HHS cuts of different kinds intended by the House, and then whether the North Carolina Senate will be able to live with the resulting, deep cuts in services for vulnerable populations.
A reality check is in order. Spending on health and human services in North Carolina has been going mostly upward, often steeply, for much of the recent past. The governor’s proposed budget hiked funding for the Department of Health and Human Services by nearly 13 percent. Whatever the state legislature finally settles on, you can be sure the trajectory will remain in the same general direction.
Yes, there have been particular programs or agencies that have lost funding in recent years. Some face restraint or cutbacks in current budget proposals. But fairness dictates that the people of North Carolina, whose taxes were raised further in each of the past three years, be given a full and accurate accounting of how their money is being spent.
It is not true that North Carolina has been “shredding its safety net,” as some put it. According to the most recent census data, our state continues to confiscate and then spend a higher percentage of personal income on public-assistance programs than most other states do. The biggest cost-driver here, by far, is the state’s Medicaid program. Because of a combination of rising health care costs in general, program and eligibility expansions by the legislature, relatively high reimbursement rates, and an inability or unwillingness to prevent Medicaid fraud, North Carolina expenditures for Medicaid have skyrocketed by 224 percent over the past decade, compared with a 160 percent increase in overall HHS spending and an 80 percent increase in the General Fund authorized budget as a whole.
In 2002, North Carolina spent 17 percent more per resident on Medicaid than the average for the Southeastern states. Our program spent nearly 30 percent more than average per Medicaid enrollee. I cannot find evidence that this spending generates significantly better outcomes, and there is little evidence that low-income people are fleeing South Carolina or Florida because of inadequate access to health care. If other states in our region, facing roughly comparable economic and social conditions, can provide a basic “safety net” at a lower cost than North Carolina does, why shouldn’t lawmakers be looking for savings in that area?
If our Medicaid costs were in line with the regional average, they would be somewhere between $350 million and $500 million less than they are now. This represents a large share of the fiscal impact of last year’s $551 million in increased taxes on retail sales and personal income in the state, though I am not suggesting that the state could accomplish such savings in a single fiscal year.
By creating ever-broader definitions of who is “poor,” who deserves a government handout, and what a “cut” is, activists can paint a rather scary picture about our state budget. Just don’t mistake it for reality.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.