The Cost of Healthcare

Project Director Jim Frogue weighs in on the Fox Business Channel

Date: December 2, 2008

Location: Washington, DC

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This afternoon, Jim Frogue, Project Director with the Center for Health Transformation was an expert guest on Fox Business with host Stuart Varney. Mr. Frogue was asked to discuss the impact of California’s state healthcare programs on their budget woes.
 
The cost of Medicaid and Medicare today is leading California towards bankruptcy. On Monday, California Governor Arnold Schwarzenegger declared California to be in a fiscal state of emergency, and Project Director Frogue commented that not only are Medicaid and Medicare healthcare systems driving the western state coffers to empty but they are also a looming economic crisis for most states. Mr. Frogue explained the affect that California’s expensive healthcare system is having on it’s over all budget. While California has doubled the number of Medicaid beneficiaries in the past ten years, the state has made no significant changes in its state budget.
 
Unfortunately, as Mr. Frogue points out, the Federal Medical Assistance Percentages (FMAP) provides little motivation for states to change their ways when it comes to Medicaid, “All states have an open ended claim on the federal treasury for Medicaid costs. In California’s case, for every dollar they spend on Medicaid they get a free dollar from the federal government.”
 
This is the third time that states have asked the federal government to increase their funding of FMAP, but each time states take the money, they make no cuts and continue to ask for more.  Mr. Frogue argues it is a downward spiral with no end in sight.  
During the interview, Mr. Frogue explained that the Congressional Budget Office predicts that Medicaid costs will continue to increase by 8% per year for the next ten years, and the alarming fact is that states cannot afford the current system.
 
As our economy dips further into a recession, automakers, banks and now states, are asking the federal government for a piece of the apparent ubiquitous bailout. It’s important to take a look at what is causing this economic down turn. If we could revamp how the state and federal government finance Medicaid and Medicare spending, and focus on finding the fraud and inefficiencies in the system, states might not be facing the hardships they are today.