Reform Case in Four Numbers | Eastern North Carolina Now

   Publisher's note: The article below appeared in John Hood's daily column in his publication, the Carolina Journal, which, because of Author / Publisher Hood, is inextricably linked to the John Locke Foundation.

    RALEIGH     In the spirit of keeping things simple, the case for reforming North Carolina's medical-assistance programs can be expressed in four numbers: 12, 15, 17, and 48.

    These are all national rankings. North Carolina ranks 12th in the nation in state mental health spending per capita. North Carolina ranks 15th in the nation in Medicaid payments per child or working-aged adult enrolled in the program. North Carolina ranks 17th in the nation in state and local taxes as a percentage of personal income. And North Carolina ranks 48th in per-pupil spending on elementary and secondary schools.

    Each of these rankings has caveats. The mental-health figure, reported by the Kaiser Family Foundation for 2010, excludes some spending on children and community programs. The Medicaid figure, also from Kaiser, excludes some subsidies paid directly to hospitals with high rates of uninsured patients. The tax-burden figure, computed with 2010 data by the Tax Foundation, puts North Carolina above the national median but right at the national average. The per-pupil spending figure, estimated by the National Education Association for 2012-13, excludes capital spending and doesn't account for state differences in cost of living and average teacher experience, factors which would bring North Carolina's ranking up a bit.

    Still, these four rankings comport with what any better set of statistics would likely show: Our medical-assistance spending is above the national average, our K-12 education spending is below the national average, and our tax burden is close to the national average.

    The education establishment and the Left allege that North Carolina fails to spend enough on elementary and secondary schools. They blame insufficient revenue, and favor raising state income or sales taxes in order to boost teacher pay and education spending in general. But if national benchmarks are a valid basis for making fiscal policy in Raleigh, then the argument for raising taxes lacks justification. The data suggest North Carolina should fund any increase in education budgets by bringing its medical-assistance spending closer to the national average.

    In fact, my initial choice of rankings still tilts the argument a bit to the Left. In only one case, taxes, did I use a statistic derived from personal income. If I ranked health care and education spending as a share of personal income, as well, North Carolina's ranking would be significantly higher in both cases (because our per-capita income is about 15 percent below the national average).

    Moreover, North Carolina is more like South Carolina, Virginia, Texas, or Florida than we are like New York, Wisconsin, Oregon, or California. So instead of national rankings, I could have used regional ones. Here they are for North Carolina among 11 Southern states:

    • 1st in mental-health spending (North Carolina's spending here is an astounding 123 percent higher than the regional average).
    • 1st in Medicaid spending per enrolled child (23 percent higher than the regional average).
    • 3rd in Medicaid spending per enrolled adult (27 percent higher than the regional average).
    • 2nd in state and local tax burden (15 percent higher than the regional average).
    • 9th in per-pupil spending (12 percent lower than the regional average).

    One might deny the relevance of benchmarking altogether, of course, and suggest that North Carolina ought not to compare its fiscal policies against those of other states. But if you accept it, and these facts, the rationale for Gov. Pat McCrory's recently announced reform initiative for Medicaid (which includes most mental health funding) becomes clear.

    That's not to say the governor's plan will succeed. Lawmakers, activists, and industry groups are already attacking it. I disagree with most of their criticisms, but let's set that aside for now. Those who question whether McCrory can derive significant savings from his Medicaid reforms ought at least to recognize that the status quo is unacceptable.

    One reason for North Carolina's lackluster economy is that we tax more and spend more on public assistance than do most of our neighbors, thus reducing both private and public investment in our state. The governor understands that. Do his critics?