Posted Mar. 3, 2008
Opinion
Cuts to Medicaid would be borne by business owners
Guest Column: Ted Almon
By now, we all know of the budget situation facing our state. Certainly some tough decisions and belt-tightening are inevitable and appropriate - but do the substantial cuts Gov. Donald L. Carcieri has proposed to the state's Medicaid and RIteCare programs help or hurt the business situation we are facing?
Forget about public policy and political ideology for a moment. This is a business decision many of us have faced in our own experience.

Any business confronting a budget crunch must consider which expenses are "fat" and which are "bone." Cut the wrong ones, and the enterprise can slip into a death spiral from which recovery is unlikely.
I fear that Rhode Island is poised to make precisely this error.
Both health insurance programs receive the majority of their funding from the federal government. In the case of RIteCare, which is the Rhode Island version of the federal State Children's Health Insurance Program (SCHIP), two-thirds of the money comes from outside the state.
The fallacy of reducing the state contribution is, Rhode Island then forfeits this outside income, all of which is subject to state taxes as it trickles down through every level of our economy. The result is an offsetting revenue reduction that could nullify the original "savings" while shrinking an economy we are trying to grow - a bad business move for several reasons. It would appear that the proposed cuts are more political ideology than fiscal responsibility.
We also should consider that health care in our state is not merely part of the social infrastructure, but an integral part of the economic engine as well.
Taking several hundred million dollars out of this industry means lost jobs, along with the attendant social costs, while significantly impairing the ability of our state's providers to compete in the regional marketplace. Financially strong health care providers can maintain excellent programs that attract patients and revenue from outside the state. An example would be the Neonatal Intensive Care Unit (NICU) at Women and Infants Hospital, where the most compromised infants from all over the region receive uniquely competent care. Women and Infants relies heavily upon reimbursement from the RIteCare program and Medicaid.
Critics will say my point is like trying to save money by buying something on sale: Basic economics teaches us that such "savings" are only real if what we bought was something we had to buy anyway.
But this is precisely the situation we face with health care. No one - including the governor - is proposing we stop providing care for the individuals affected by these cuts. So those costs will remain.
We are merely shifting the costs to the private sector - largely, the businesses providing health benefits. So in a sense, the business community should look upon such cuts as a perverse tax.
Many business people are fiscal conservatives. By nature, they believe in personal responsibility and recoil from programs like Medicaid that they see as part of an expanding welfare state. Where health care is concerned, however, this often prompts them to act in a way that is actually in opposition to their own economic interests.
Whereas Medicaid is funded by the taxpayers at large, the burden of uncompensated care resulting from reduced Medicaid eligibility is borne disproportionately by businesses buying commercial insurance.
Perhaps businesspeople in Rhode Island should shed the filter of their political leanings when looking at health-policy reform. Cuts to the Medicaid and RIteCare programs are clearly not in their best interests, nor are they a constructive strategy in the state's budget deliberations.

Ted Almon is president and CEO of The Claflin Co., a medical equipment supplier, and is an active participant in the debate over health care in Rhode Island. He was a member of Lt. Gov. Elizabeth H. Roberts' health reform task force, the outgrowth of which was recently unveiled as the Healthy Rhode Island Reform Act of 2008.