As Wages and Salaries Stagnate in Florida and Its Metro Areas, Growth in Government Aid Props Up the Economy
August 12, 2011

Personal income in Florida and in each of the state’s 20 metropolitan areas rose slightly in 2010 after declining in 2009 for the first time in decades. What’s responsible for the increases indicates the importance of government aid in propping up the state’s struggling economy.

The good news about the state’s income increase is tempered by the fact that it still grew less than the 2.9 percent growth in all of the U.S.  Among Florida’s metro areas, only one grew at a faster rate than the national rate.

Particularly notable at a time of both federal and state budget cuts:  It wasn’t wages and salaries that created Florida’s income growth, but government aid, data from the U.S. Bureau of Economic Analysis shows.

Florida personal income increased by 2.1 percent in 2010, but wages and salaries, which make up more than half of state personal income, rose by less than a percentage point.  Government aid, up 8.2 percent, accounted for almost all the modest rise in personal income. 

(Government aid, formally called “transfer receipts from governments,” includes such programs as Social Security, unemployment compensation, Supplemental Security Income, Medicare, Medicaid, and the Children’s Health Insurance Program.)

In six metropolitan areas income from wages and salaries actually declined in 2010.  In addition, in none of the state’s 20 metros did the rate of increase equal the national growth rate.

But every Florida metro area recorded much higher increases in government aid, ranging from 6.2 percent to 12.8 percent.  (The greatest increases came in three metro areas impacted by the recovery dollars that flowed in after the BP oil spill – Crestview, Panama City, and Pensacola.)

Unemployment in Florida remains higher than the national average with 33 counties maintaining double digit rates.

As the number of jobs continues to lag in Florida along with income from wages and salaries, any decline in government dollars going to the social safety net will hurt income growth. 

Money from these programs is spent quickly for the basics of life.  Businesses benefit and the multiplier effect results in even more bang for the buck as the money turns over in the local economy.  

In addition to making it more difficult for millions of Floridians trying to get by, reducing these programs will make Florida’s overall economic growth slower and more difficult. 

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Climbing Medicaid Enrollment May Soon Peak
August 4, 2011

Now that unemployment levels have begun to level off and are now slowly falling in many parts of Florida, enrollment in Florida Medicaid appears to be plateauing as well.  

Although statewide seasonally-adjusted unemployment levels reached its highest level last December, Medicaid enrollment has yet to fully peak, however.  This time lag may be explained, at least in part, by factors such as laid-off workers exhausting their COBRA continuation coverage and unemployed parents retaining access to Medicaid for a transitional period after returning to work.  (It should be noted that Medicaid numbers are affected by factors unrelated to the economy.  Demographic factors such as the aging of Florida’s population are also relevant.)

Medicaid enrollment for July 2011 was about 2.92 million, down almost 3,800 (-0.1 percent) from the previous month. Such isolated month-to-month reductions are not uncommon, however.  More pertinent are longer-term trends that indicate rapidly tapering growth.  In particular:

  • The year-over-year increase (July 2011 vs. July 2010) was 6.5 percent, the smallest such increase since July 2008.  By comparison, the year-over-year increase for November 2009 was a staggering 17.4 percent.
  • During the first six months of 2011, enrollment grew by 81,450, the smallest half-year increase since the first half of 2008.  Medicaid grew by 2½ times that amount during the first six months of 2009.

Given that the growth in Medicaid spending during the recession has been outpaced by the growth in the Medicaid rolls, legislators’ spurious claim that Medicaid spending is spiraling out of control may also be about out of gas.

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Response to Medicaid Spending? Look to History, Not Hyperbole
July 25, 2011

Last week, ranking Democratic members of the health-related committees in the Florida House sent a letter to the federal agency that oversees Medicaid, urging them to reject Florida’s forthcoming request for approval of a new statewide Medicaid managed care experiment. The experiment was approved by the Legislature last session (House Bills 7107 and 7109).

In his response, the House Majority Leader lashed out at the authors for supposedly arguing that “Florida should continue with an outrageously expensive, fraud-laden Medicaid system, almost certain to throw our state into a financial abyss”, thereby “jeopardiz[ing] Florida’s financial stability and future.”

For one, that representation is wholly inaccurate. This was not resistance to taking steps to improve and strengthen Medicaid. Rather, it was resistance to turning over decision-making in Medicaid to capitated managed care plans with incentives to delay or deny care to the most vulnerable, highly suspect track records (including fraud) and the unprecedented ability to vary benefits and medications in harmful ways.

More importantly, acceptance of leaders’ persistent mischaracterizations of Medicaid as well as their proposed solution to Medicaid’s purported problems is only possible if one is willing to completely ignore volumes of Florida’s recent, relevant history.

Reviewing the Historical Record

Let’s recall a little of that history.  In his January 2005 “Medicaid Modernization Proposal”, in which he laid out his case for what was to become the Medicaid Reform experiment, then-Governor Bush stressed that “if Medicaid continues to grow at its current rate…the program will consume more than half of all state spending in just 10 years.” Specifically, as Bush insisted and others echoed, Medicaid spending was destined to reach $50 billion by 2015 if left unchecked. 

Although the statewide managed care experiment he called for at that time could only be implemented in only 5 of 67 counties, and unsuccessfully at that, current Medicaid spending projections for 2015 nevertheless come in at less than half of that $50 billion level.  (Not to mention, only a quarter of that “less than half” will actually be state general revenue dollars.)

That isn’t remotely the whole story, however. Medicaid not only did not cast Florida into the abyss as threatened at that time, due to a number of factors beyond the scope of a blog discussion, Medicaid spending has been anything but outrageous and uncontrolled.

In 2004-05, Medicaid spending per patient was approximately $538 per month. At the time, the governor warned that monthly per-patient spending would approach a whopping $900 by 2010-11 and continue climbing from there.  Perhaps not surprisingly, the forecast that gave rise to those warnings is no longer available on the Legislature’s website.

Evaluating the Historical Reality

So just how far off were these predictions and the conclusions about the need for deliverance through managed care experimentation they justified? Actual per-patient spending for 2010-11, which just ended, is expected to be $560.

In short, during the six years since the case for Medicaid Reform was laid out, per patient spending increased by less than one percent (0.7%) annually. Furthermore, only $113 of that $560 was state general revenue (GR). That’s actually down from $152 back in 2004-05. You read that correctly; the State’s investment of GR in Medicaid was one-quarter less per recipient last year than six years earlier.

Repeating Historical Mistakes

It is against this backdrop - with the Medicaid forecast for 2015 slashed by more than half and per-patient spending growing at a fraction of the rate of inflation – that the Legislature has again demanded a new Medicaid managed care experiment, closely related to the previous one, but with more risks.

Inaccurate budget forecasting is not the problem. Burying those forecasts, however, only to brandish the same arguments and demand the same flawed policy response those forecasts were used to justify only a few years ago is.  All the more, given the risk to vulnerable seniors, children and people with disabilities.

P.S. Reconciling Divergent Views of History

A review of these issues would be incomplete without an acknowledgement that legislators grappled with what was presented as a $2 billion shortfall in Medicaid last session, ultimately cutting almost $1 billion from what would have been a continuation budget.  How does that square with the notion that leaders incited unjustifiable Medicaid spending panic?

This topic should rightfully consume a blog entry in its own right, but two factors warrant particular focus.  First, the recession sent hundreds of thousands of Floridians who lost jobs and coverage into Medicaid. Second, while the recession curbed state revenue collections under Florida’s regressive tax structure, legislators focused on Medicaid as a scapegoat as an alternative to considering reasonable ways to meet the state’s basic needs.

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