Over the past near 40 years, the share of the personal income of both Americans and New Yorkers spent by state and local governments on cash assistance for the needy has plunged, a long term look at data from the Governments Division of the U.S. Census Bureau shows, while the share spent on payments to private sector medical care vendors, generally under the Medicaid program, has soared. The data, in the attached spreadsheet, shows that public health and hospital spending has fallen as a share of personal income in New York while rising in the U.S. as a whole, while spending on social services has increased in both areas, though by much less than Medicaid-funded health care vendor payments.
The data is in the attached spreadsheets, and is presented in a series of four charts. Please ignore the error message when you open the document and click “no”: It was created when I saved the spreadsheet in an earlier version of MS Excel to make sure everyone could open it.
The data includes the following categories of expenditure. Cash welfare includes cash expenditures under federal categorical programs such as AFDC and TANF, generally known as welfare, their state equivalents for those who do not qualify for federal assistance, previously known as Home Relief in New York, and SSI benefits for the disabled. Medical vendor payments are payments made to non-government health care providers in exchange for services. Generally, these are funded via the Medicaid program. Public hospitals include the expenditures of hospitals owned by state and local governments; much of their budgets have also come from Medicaid in recent years. The “social services” category includes, in New York City, the operations of agencies such as the Administration for Childrens’ Services, the Department of Homeless Services, and the Human Resources Administration, as well as their payments to social services agencies. I combined Public Health and payments to non-public hospitals (other than those in exchange for services) to simplify the charts – the latter has just about disappeared. And I combined state and local expenditures because they are too entwined to disentangle in these categories.
On all these public services and benefits combined, U.S. state and local government spending has risen from $40.04 per $1,000 of the personal income of all U.S. residents in 1972 to $53.49 per $1,000 of personal income in 2008, an increase of 33.6%. For New York State, spending on these categories combined increased from $66.31 per $1,000 of personal income in 1972 to $68.99 per $1,000 of personal income in 2008, an increase of 4.0%. New York State’s spending in these categories as a share of its residents’ personal income was 65.6% above average as a share of its residents’ personal income in 1972, and 29.0% higher in 2008.
As the two 1972 and 2008 charts show, the national increase in total spending was driven primarily by an increase in Medical Vendor Payments (mostly Medicaid) spending, which increased from $6.72 per $1,000 of personal income in 1972 to $23.93 in 2008 in the U.S. (and from $8.63 per $1,000 of personal income in 1972 to $33.20 in 2008 in New York State). The rise of Medicaid-funded vendor payments squeezed public health and hospital spending in New York, which fell from $8.00 to $6.10 per $1,000 of personal income for public health and from $17.20 to $12.91 per $1,000 for public hospitals. In the U.S. as a whole state and local public health spending increased substantially from $3.11 to $6.52 per $1,000 of personal income – more than in New York State, while public hospital spending increased slightly.
Meanwhile, spending on cash welfare payments plunged from $10.63 per $1,000 of U.S. residents’ personal income in 1972 to $1.68 in 2008, and from $16.21 per $1,000 of New York State residents’ personal income in 1972 to $2.19 in 2008. Within the category, in the U.S. as a whole federal categorical programs AFDC and TANF accounted for 93.3% of cash welfare expenditures in 1972. By 2008, that share had fallen to 63.5%. In New York State, that share was 61.2% in 2008. And, as I reported at the time, the financial bailouts in late 2008 combined approximately equaled all the expenditures under federal categorical programs from 1952 to 2005, adjusted for inflation. http://www.r8ny.com/blog/larry_littlefield/welfare_queens_dethroned.html
Spending on Social Services also rose substantially from $4.04 to $6.92 per $1,000 of personal income in the U.S., while New York State recorded a smaller percentage gain to a higher level with an increase from $7.94 to $10.08. Note that the 1996 federal welfare reform substituted services that were supposed to make it easier to work, such as child care, for cash assistance.
There have been three sets of health and welfare programs in the U.S.: a very generous one for those aged 65 and over (Medicare, Social Security, Medicaid for seniors), a less generous one for those who generally work (unemployment insurance, worker compensation) and an even less generous one for those who do not work (cash welfare, SSI, Medicaid for non-seniors). The data show that spending on welfare programs for those who generally work – unemployment insurance and worker compensation – has also fallen when comparing 1972 and 2008, from $5.45 to $3.90 per $1,000 of personal income in the U.S., and from $8.32 to $4.51 per $1,000 in New York State. Despite this reduction in spending, most state unemployment assistance funds are not bankrupt, with the one for New York among the worst off.
Year-by-year data, in the other two charts, adds a few interesting insights. Cash welfare spending fell substantially as a share of personal income, in both the U.S. and in particular in New York, in the 1970s. My guess is that cash-strapped state and local governments held welfare payment rates flat in the face of the substantial inflation that decade, slashing their real value and what recipients could buy with it. Another rapid decline – to a level of insignificance compared with total public spending — followed federal welfare reform in 1996.
Measured as a percent of personal income, Medical Vendor Payments spending soared from 1989 to 1992 in both the U.S. and New York State; in New York it increased from $18.27 per $1,000 of personal income to $27.52 per $1,000 of personal income in just three years. Spending in this category then leveled off in New York State and fell somewhat in the U.S., but in a way that the health care industry could approve of. As thousands were purged from the welfare rolls, they were also denied government-funded health care, meaning the health care industry was taking as much (in New York) or slightly less of everyone’s income to provide health care to many fewer beneficiaries.
Another upturn at the national level and rocketing upward in New York took place from 2000 to 2004 (note state level government finance data is not available for 2001 and 2003 due to Census Bureau cutbacks). In just a few years, New York’s medical vendor payments spending soared from $30.59 per $1,000 of New York State residents’ personal income to $40.43. This dates to the era when Local 1199 and the Greater New York Hospital Workers’ Association successfully played Republicans and Democrats in the New York State legislature off against each other in pursuit of ever higher funding.
From 2004 to 2008, however, medical vendor payment spending in New York State stayed at about the same level in dollars, and with personal income rising in the housing and consumer debt driven expansion, it fell as a percent of personal income. It has no doubt risen again since, but only because more people have become eligible to services and personal income has fallen, not because the health care industry has been able to charge more for Medicaid. This decline, however tentative and short term and however much higher it leaves the burden of Medicaid in New York compared with the U.S. average, is a surprise to me. May I remind Sheldon Silver that the UFT also played Republicans against Democrats to secure the 25/55 pension that will destroy the New York City schools?