Medicaid - the Monster that Ate Michigan's Budget

Spending by the Michigan Department of Community Health increased 65 percent from 2000 to 2010. During that period, overall state spending grew by "only" 37 percent, while Michigan's population actually declined by 0.55 percent.

Most of the DCH spending increase was in Medicaid, or health care welfare for the poor, funded by a combination of federal and state money. A House Fiscal Agency PowerPoint shows that Medicaid spending has risen more than 125 percent since 2000.

A large part of the increase is from a Medicaid expansion called the "State Children's Health Insurance Program" or SCHIP, begun in 1997, which extends coverage to the children of parents who have lower incomes but are still substantially above the official poverty level. The 2009 federal "stimulus" program also increased Medicaid spending levels.

In the fiscal year that begins Oct. 1, DCH will spend $14.2 billion, of which $8.9 billion is federal money, with the rest extracted directly from Michigan taxpayers by the state government. This spending translates into a $1,370 average cost for every man, woman and child in Michigan. The entire state budget for the year will be $47.2 billion, so MDCH spends nearly one out of every three dollars of state government money .

Federal Medicaid regulations and mandates allow states very limited opportunity to try different ways to contain Medicaid costs. In addition, the availability of federal matching funds for every state tax dollar creates an incentive for lawmakers to spend more, bringing in yet more federal money. One alternative that has been discussed to solve both problems is to replace the current funding system with few-strings-attached federal "block grants" to the states.