Medicaid, Kidcare and Other Services
We noted in Chapter 3 that just as the real estate boom crashed and state revenues stalled out, Florida providentially experienced a pause of several years in K-12 enrollment growth.
The same happened with Medicaid enrollment and expenditures, a second huge component of the state budget. (Medicaid spending is more than $16 billion annually and makes up more than 20% of the state budget).
Medicaid enrollment leveled in the two years since the publication of Tough Choices (see Chart 1). Expenditure growth slowed to about 6% in 2004-2005 and spending actually declined in 2005-2006. But growth resumed in 2006-2007 and is expected to continue apace over the next few years (see Chart 2).
So that relief valve on spending pressure has closed.
As we wrote in the first report and as is evident in the charts, the history of Medicaid enrollment and spending is marked with periods of a few years where growth is not significant. Almost always it resumes, however. at a rate of 10 to 15% or even higher.
Besides leaving the medical expenses of many Floridians uncovered, big cutbacks in Medicaid spending are an unattractive option because that would waste an available federal match of around $1.40 for every dollar the state spends.
When Tough Choices was released in November 2005, Florida was embarking on a pilot plan in two counties to privatize delivery of Medicaid services in a sweeping fashion. The experiment was not a disaster, but neither did it test out as showing demonstrable savings in a fall 2007 evaluation. So its future as a statewide solution to rising Medicaid costs seems in doubt.
KidCare is a parallel story. The eligibility rules change with some frequency so there are both restrictions and some confusion holding down enrollment. The upshot is that enrollment peaked at almost 340,000 in spring 2004, fell to below 200,000 two years later and has been increasing very slowly since then. (See Chart 3).
So it is fair to conclude that the state (again with a federal funding match available) has cut its commitment to insuring children from poor families to about two-thirds of what it was a few years ago. The problem is made worse by the unwillingness of private health insurance to cover children. Florida is tied for second-worst in the country in the percentage of uninsured children aged 0-18.
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In Tough Choices our emphasis has been on the broad revenue picture and the biggest categories of expenditures. But the current budget pinch puts pressure on what might be assumed to be more routine spending and service – like adequately staffed courts trying cases in a timely fashion.
Our first report devoted an entire chapter to infrastructure needs. We will not attempt to revisit the issue here, in part because we are unaware of any broad new studies to quantify the problem. The St. Petersburg Times “For a Better Florida” series recently identified a backlog of more than $1 billion for approved road projects alone.
We wrote in the original Tough Choices about the wildly uneven county impact fees on new construction to pay for the school building needed to accommodate additional students. The fees ranged from a pricey $10,000 per unit in a few counties to the ludicrously low ($192 for decades in Hillsborough County).
In the last two years, the trend has been to levy higher fees. At the same time the pressure for school construction eased in many, but not all, counties along with the enrollment pause. Our best guess is that construction needs will resume and enrollment begin growing again in a year or two. Class size amendment compliance requires both many more teachers and more rooms in which they can work.
In summary, the bright spots are few and appear to be transient when surveying Florida’s government service needs. We are pressed on some major spending categories, woefully stingy on others, and the disparity of needs and resources is likely to get worse near term.
Whether Florida’s tax structure will capture a reasonable share of the projected surge in retirees’ wealth and real estate value is an open question.
We will close in the next and final chapter updating some of the original Tough Choices recommendations and adding a few more.