Medicaid, the joint Federal-State program that was created to provide health care for the poor, celebrated its 40th birthday in 2006. There was no party for the program. In Florida and around the nation, Medicaid is growing at a long-term, unsustainable rate and threatens both state and federal budgets. It represented 2 percent of GDP in the year 2000 and is projected to rise to 9 percent by 2075. This rate of growth, combined with other unfunded liabilities in Social Security and Medicare, could require a devastating doubling of Federal taxes and enormous increases in state funding. Indeed, the program is now larger than education in many state budgets. In fact, the latest estimate from the Medicare Trustees (Medicaid is legislatively part of Medicare) show the present value of the nation’s long-term unfunded liabilities to be $89,000,000,000,000.00. To spell it out, that’s eighty-nine trillion dollars.

Over the past 17 years the Florida program has increased at approximately 10.4 percent annual rate versus around 6.6 percent for medical inflation generally.In 1990, Medicaid represented approximately 10 percent of Florida’s state budget. As of 2007, that total had increased to approximately 21 percent. Extrapolating these trends over 75 years or so would show Medicaid growing to over 200 percent of the state budget by 2085. Obviously, however, this trend is unsustainable and represents the major challenge to policymakers. In addition, there is a strong possibility that the expansions of Medicaid coverage mandated in the new Federal legislation will make the fiscal problem worse.

Unfortunately, the enormous fiscal problems facing Medicaid often overshadow its other major flaw. That is, Medicaid has a deserved reputation as a low quality provider of health care. It has been argued that the Medicaid population is sicker than the general population, which is probably true. What proponents often fail to understand is that Medicaid’s low quality of care is what makes some of the beneficiaries sick. The program delivers episodic treatment, poor preventative care, and a low quality of services to many of its beneficiaries. The plan also produces some tragic health outcomes for America’s most vulnerable populations.

Read the Backgrounder here.