February 27,2012

Press Contact:

Julia Lawless, Antonia Ferrier, 202.224.4515

Facts Are Stubborn Things: How the President’s Medicaid Policies are Threatening Education Funding

Today, President Obama lectured Governors across the country to invest more resources in education.  “…the fact is that too many states are making cuts to education that I believe are simply too big," he said during a meeting with the National Governors Association (NGA). 

Unfortunately, the President forgot to mention that his own policies with respect to the Medicaid program are straining state budgets and draining critical resources from education.  

Governor Heineman (R-Neb.), the Chairman of the NGA this weekend said, “The overall fiscal condition of states has improved, but governors are very concerned about the growth of Medicaid as it consumes an increasing share of state budgets.  Medicaid’s rapid growth could result in less funding for education...”

Former Governor Bredesen (D-TN) has previously said, “I can’t think of a worse time for [the health care law] to be coming … nobody’s going to put their state into bankruptcy or their education system in the tank for it.”

A report from the NGA last fall indicated that states are still struggling from the effects of the economic downturn and are “feeling the squeeze from the demands for spending from both local and federal governments.”  The report specifically noted the challenge that, “spending on Medicaid is expected to consume an increasing share of state budgets and grow more rapidly than state revenue growth.”  It further said in fiscal year 2011, Medicaid consumed approximately 23.6 percent of state budgets while elementary and secondary education consumed just 20.1 percent. 

Let’s take a look at the facts:

The President proposes to increase Medicaid spending:  The President’s FY 2013 Budget  proposes spending $4.37 trillion on the Medicaid program over the next 10 years, and by 2022, this represents a 35 percent increase in program spending when quantified as a percentage of the U.S. economy.  These spending increases include the health care law’s Medicaid expansion, which constitutes the largest expansion of the program since it was created in 1965.  

The President’s health care law contains mandates that are already bankrupting states:  The President’s so-called “stimulus” package and health care overhaul contained an onerous mandate on the states, the Medicaid maintenance of effort requirements, that prevent states from making basic program integrity reforms to eligibility.  Senator Hatch has called for repeal of these mandates. 

The Medicaid expansion in the President’s health care law will crowd out education spending:  The President’s health care law imposed unrealistic new Medicaid spending mandates on the states.   In fact, half those newly insured under the President’s health care law will be enrolled in Medicaid.  A Hatch-Upton report last year found that this Medicaid expansion will force states to spend at least $118 billion through 2023 – spending that will drain state resources from education. 

The President has proposed making it more difficult for states to lower Medicaid spending on providers:  The Obama administration has proposed taking flexibility away from the states by forcing them to ask permission from Washington whenever they believe it necessary to lower spending on Medicaid providers. 

Just one of the many flawed policies in the President’s health care law will cost states $13.6 billion through 2023:  According to a new report by Milliman, the health insurance tax will costs states $13.6 billion starting in 2014 because its costs will be passed through to state Medicaid programs.  In the same period, it will cost the federal government $24.8 billion in higher Medicaid spending.

Bottom line, the combined effect of the President’s policies has already been a major factor in forcing states to make cuts to education.  According to a recent report, 37 states invest less per student in this school year than they did last school year, 30 states are investing less than they did under the previous administration, and 17 states have slashed funding on a per-student basis by more than 10 percent before the recession. 

The best way for this administration to help states have adequate resources for programs, like education, would be to give them more flexibility with the Medicaid program.