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A State of Decline: What a TABOR Would Mean for Ohio (cont.)


Health Insurance for Low-Income Households

State funding for Medicaid would have had to be cut by over $450 million in FY 2003. Expenditures could be cut by reducing the number of people eligible to be covered by Medicaid or by reducing the type of services that are covered under the program. For reductions of this magnitude, both approaches would be necessary.

Moreover, for every dollar that Ohio expends on services in Medicaid, it receives $1.43 from the federal government. Thus a $450 million reduction in state expenditures would trigger a total (state and federal) $1.1 billion reduction in the services provided under the Medicaid program.

Ohio has less latitude for cutting program eligibility than many other states do. In part, this is due to the fact that eligibility in a number of areas already reflects federal minimum standards. To partially meet the $450 million reduction, all of the following eligibility reductions would be required.

  • Dropping health insurance for all children enrolled in Ohio’s child health insurance program (Healthy Start) — which would have eliminated coverage for more than 200,000 Ohio children — could have reduced state expenditures by about $58 million — just a fraction of the required reductions. Children between age 6 and age 19 living in a family of three people, for example, would lose coverage if their family’s annual income was between $15,260 and $30,520. Many parents in that income range are not offered health insurance by their employers or cannot afford the steep premiums required to cover their children.
  • Eliminating coverage for about 60,000 low-income parents — mostly mothers — in the Ohio Healthy Families program could have cut state expenditures by another $56 million.
  • Ending prescription drug coverage for all adult Medicaid beneficiaries who are not also enrolled in Medicare. (Under the new Medicare drug law, all Medicaid beneficiaries who are dually enrolled in Medicare will get prescription drug coverage under Medicare instead of Medicaid by January 2006.) This would end all prescription drug coverage for all classes of medications, including drugs for cancer, heart disease, mental illness, HIV, infections, etc. for almost 700,000 non-elderly adults, including a large number with permanent disabilities. This would have reduced state expenditures by about $207 million in 2003.

Even with these deep cuts, which would eliminate all health insurance coverage for more than one-quarter of a million low-income children and parents and end prescription drug coverage for almost 700,000 beneficiaries, the state would have saved only $321 million in 2003 — just over two-thirds of the budget reductions necessary if Medicaid bore a proportionate share of the cuts. To make up some of the additional cuts required to reduce state Medicaid expenditures by $450 million, policymakers could cut certain Medicaid services for the elderly, such as in-home health services offered under Ohio’s PASSPORT program, or could restrict Medicaid reimbursement for nursing homes, which could reduce the quality of nursing home care.

The Slow Squeeze of TABOR

This report shows the impact in FY 2003 of a TABOR that became effective in 1995. It looks over this long time period because the effects of a strict spending limit may take years to be fully felt.

Spending limits typically rise at a rate only slightly lower than the cost of providing services, perhaps a difference of one or two percentage points. Over time, however, the difference grows dramatically. A one- or two-percentage point difference every year can translate into a 13 to 26 percent gap over the course of a dozen years.

States often react to the early years of a limitation by using accounting maneuvers and short-term deferrals. These can become long-term problems. States may push spending into future years, but that deferred spending can exacerbate the even tighter limits that lie ahead. States may defer routine maintenance items, capital improvements, staff training, or other investments in infrastructure or workforce. Such changes may help balance budgets in the short run, but can be costly in the long run.

When public expenditures are investments, it may take many years for the harm from lack of investment to be evident. Much state spending is intended to have long-term impacts. Studies show, for instance, that early childhood spending has great benefits that do not begin to show up for many years. Infrastructure spending is another example. Failure to make expenditures now can have a negative effect on a state’s quality of life in future years.

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