If the stimulus so far has been about filling holes left by the recession, it has its work cut out in New York. Like other rich states, its tax revenues have plummeted in the recession, leaving a gaping hole in its health care obligations. Almost one in four people in New York are on Medicaid, and the program consumes one-third of all money the state spends.
New York State has wrestled for years with the growth of Medicaid, which now costs more than $50 billion a year, more than double the spending in 1995. With stimulus spending, the federal government covers about $30 billion, more than the 50 percent share it has historically covered in New York.
Medicaid is funded by both states and the federal government. When the crisis hit, Washington took a bigger chunk of the check. Without that generosity, the Government Accounting Office found in a report issued today, states "could not have continued to support the substantial Medicaid enrollment growth they have experienced, most of which was attributable to children."
When the Medicaid assistance program runs dry next year, it will have spent more than $100 billion during the recession and recovery. While it's difficult to say whether the stimulus worked, it's fair to say to point out the work it did. Enrollment in Medicaid has increased 17 percent since the recession, to 50 million nationwide. Without government support, states would have had to cut or abandon their responsibilities to our neediest citizens.
Whether this makes for good stimulus -- that is, whether money spent on Medicaid saves jobs and promotes economic activity -- I can't say for sure.The Congressional Budget Office has said (graph below) that providing aid to states for purposes other than infrastructure is only mild stimulus. On the other hand, aid to cash-needy families is typically considered money well spent -- both humane and effective. The bottom line is that we've bailed out Medicaid for the last two years, but in the next two years states like New York are going to have to think about ways to pay for their promises that don't involve hoping the government will keep picking up the check.
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