Fixing Michigan's Structural Deficit Requires Fixing Medicaid
Rising health care costs for the poor and the disabled via the states Medicaid program are unbalancing the state's budget Since 2001, the state's portion of Medicaid funding has risen 88%. Because state revenue has been flat during this period, dollars from other areas have been shifted to fund Medicaid: funding to state universities has been cut 11%, revenue sharing for our cities cut 9%, funding for arts grants cut 86%, and funding for state police cut 16%. Health care costs have become the single biggest expense within the state budget, exceeding the amount allocated to education.
Rising Medicaid cost can be largely attributed to an influx of new recipients. The state is gaining approximately 15,000 new Medicaid recipients per month. One in every six Michigan residents is now covered by Medicaid. Thirty five per cent of all newborn deliveries in Michigan are paid for by Medicaid.
Something is wrong when despite spending billions of dollars on health care for millions of its citizens, Michigan remains woefully unhealthy. We have unacceptably high rates of death from cardiovascular disease and stroke. We suffer from epidemics of high blood pressure, diabetes, and high cholesterol. In 2004 the Granholm administration set its health goals for Michigan in its report entitled "Healthy Michigan 2010." These goals included reducing the death rate from heart disease to 166/100,000, the death rate from stroke to 48/100,000, and the diabetes related death rate 45/100,000. None of these lofty goals will be met.
The Healthy Michigan 2010 report also set goals to reduce the number of adults engaged in less than 30 minutes of physical activity five days a week to 20%, to reduce cigarette smoking to 12%, and to reduce the proportion of obese adults to 15%. None of these goals will be met. Of the 27 goals being tracked, Michigan is likely to meet only five of them by 2010.
The failure of a vast increase in health care spending to produce any measurable improvement in Michigan's health is explained by the fact that the health of a population is largely determined by its behavior, not by health care spending. So long as individuals smoke excessively, fail to exercise, and are non-compliant with care, purchasing them health care services cannot make them healthy.
Changing the behavior of Michigan residents, and in particular Medicaid recipients, is critical in order to reduce runaway Medicaid spending, help fix the state's structural deficit, and make Michigan healthy.
Incentives have proven their effectiveness in inducing behavioral change among Michiganders. In 1985, Michigan's rate of seat belt usage was only 53%, the lowest in the country. Following the implementation of positive and negative incentives (insurance discounts and primary enforcement) seatbelt usage in Michigan climbed to a nation leading 98.5%.
If Michigan is going to get results from Medicaid, incentives need to be incorporated into the program design so that recipients quite smoking, start exercising, and take better care of themselves. Controlling the growth of runaway Medicaid expenses would help stabilize the state's budget. Fixing Medicaid is one of the keys to turning Michigan around.