Increases in Medicaid Spending Come at the Expense of Higher Education: Study

 Gabrielle Levy
  2nd-May-2018

THE COST OF PAYING FOR college, even at public universities, has skyrocketed in the past several decades as states have decreased their per-student funding, diverting those dollars toward paying for government-funded health care instead.

A new analysis conducted by Education Next has found that public-welfare spending has increased since 1987 and has come at the expense of spending on higher education, putting upward pressure on the cost students must pay out of pocket.

The cost to students – the average net price after grants and scholarships – for a four-year degree doubled in just the past 20 years, from $2,180 in for the 1997-98 school year to $4,140 this year, in inflation-adjusted terms.

Temple University associate professor Douglas Webber said in the analysis that the increase in spending on state Medicaid, in particular, could account for the decrease in spending on higher education.

"In the aggregate, states have shifted most of their former investment toward public-welfare programs, particularly Medicaid," Webber noted. "This finding highlights the struggle state legislatures face to balance the immediate needs of today against investments in the future. Most important, it illustrates that constraining the rise of health-care costs is critical not just for those who care about health-care reform but for the public-higher-education landscape as well."

Since 1987, Webber found, the average state and local spending on public welfare has increased from approximately $645 per resident to $1,930 per resident in 2015, pulling even with funding for K-12 education, which rose from $1,378 per resident to $1,946 per resident over the same period. Webber defines "public welfare" spending as Supplemental Security Income, food stamps, Temporary Aid for Needy Families, and Medicaid expenditures.

Spending on higher education, meanwhile, has remained flat over that period, at approximately $250 per resident.

On average, state and local spending on higher education has increased by 13.5 percent in inflation-adjusted terms between 1987 and 2015. But at the same time, the number of students has exploded 57.4 percent.

As a result, per-student spending has decreased by $2,337 over that period, even before accounting for inflation, from $9,489 in 1987 to $7,152 in 2015.

In attempting to define the relationship between increases in appropriations in some areas of public spending and decreases in others, Webber said public welfare spending is the clear culprit in explaining the relative decline in higher education funds.

"Across multiple changes to my methodology, public welfare spending is always the dominant factor, accounting for between 53 percent and 100 percent of the decline in higher-education support," he wrote. "For example, looking at spending per capita within each category rather than total spending reveals that a $1 increase in per-capita public welfare spending is associated with as much as a $2.44 decrease in per-student higher-education funding."

And while spending on K-12 education has improved, Webber said there is no evidence to blame it for the decrease in higher education spending.

"This isn't surprising, as governments that see education as a priority likely value both K-12 and higher-education spending," he wrote. "In addition to this positive relationship, K-12 funding is financed in roughly equal proportions between the state and local levels, while public money for higher education comes mostly from states."

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