Peter Orszag: State Medicaid growth crowding out college
What does health care have to do with any of this? Research I’ve done with Tom Kane of Harvard and the Gates Foundation finds a surprisingly strong connection: over recent decades, as state governments have devoted a larger share of resources to rising costs of Medicaid, the health care program for the poor, they have cut support for higher education.
Governments’ general support for higher education 25 years ago was nearly 50 percent greater than state spending on Medicaid. That relationship has now flipped: Medicaid spending is about 50 percent greater than support for higher education. If higher education’s share of state budgets had remained constant instead of being crowded out by rising Medicaid costs, it would be getting some $30 billion more than it receives today, or more than $2,000 per student.
These Medicaid cost increases have closely tracked cost increases in the rest of the health care system over the past three decades. So the problem is not Medicaid per se; the fundamental problem is rising health care costs as a whole.
Our research suggests that states tend to rob education to pay for Medicaid during economic downturns. And when the economy recovers, the money for education usually doesn’t get restored. Today, as in other business cycles, states are cutting back. Georgia reduced higher education financing by 7 percent for fiscal 2011; Washington reduced spending for the University of Washington by 26 percent over this year and next. According to the Center on Budget and Policy Priorities, since 2008 at least 43 states have made cuts to financing for public colleges and universities or have increased tuition.
Tuitions have risen significantly and now account for 37 percent of total public higher education budgets, up from 25 percent in 1985. Yet this has not been enough to offset state government cutbacks. That’s because, just 30 years ago, state appropriations generally accounted for about four times the revenue of tuition — so offsetting a 20 percent reduction in state support would require raising tuition by 80 percent. This is simply not politically feasible.
http://www.nytimes.com/2010/09/19/opinion/19orszag.html?_r=2&
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