Minnesota’s Economic News – W/E 4/16/21
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In 2010 Minnesota spent $20,000 per person in poverty. Nationally, however, the amount spent was just $11,000. Similarly in 2018, Minnesota spent $30,000 per person in poverty. Nationally, the average was just $17,000.
A lot of people have excused these high levels of spending for numerous reasons. One of the issues people tend to bring up is that spending on welfare mostly constitutes expensive health care programs like Medicaid. Additionally, most health care spending is consumed by the elderly, and services on the elderly tend to be expensive.
It is true that the majority of welfare spending goes to health care programs like Medicaid. And it is true that most Medicaid spending is consumed by the elderly and disabled. According to the Minnesota Department of Human Services, in 2019 spending on the disabled and elderly made up about $8 billion of the total $13bn spent on Medicaid. This is however the case with most states. When we adjust Medicaid expenditure per elderly or disabled person, Minnesota still spends significantly higher.
In order to justify that our more than average levels of welfare are due to healthcare spending on the elderly, we would have to assume that Minnesota has more elderly people than other states, for this is the only way we could have lower our per head expenditure to match that of other states. This is however not the case. In 2018, people aged 65 and older made up 16% of the total population of Minnesota. This is about the same as the national average.
And when we look at total welfare spending on the basis of spending on people aged people aged 65 and older, Minnesota ranks poorly. In 2010, Minnesota ranked 4th highest spending state on public welfare per person aged 65 and older. In 2018, Minnesota ranked 5th.
When compared to the national average, Minnesota spends significantly more per elderly person. For instance, in 2018, Minnesota spent $18,093 on welfare per person aged 65 and older. This is $4,384.07 (or 31.98%) more than the national average spent–$13,710. Minnesota ranked only behind California, Alaska, New York, and Massachusetts in 2018 on public welfare spending per elderly person.
Source: US Census Bureau
Admittedly, not every elderly person is on Medicaid, and not all spending on Medicaid goes to the elderly. So it is also helpful to specifically analyze Medicaid spending on older people. The story is the same on this front. For instance, in 2010, when Minnesota’s spending on welfare per person in poverty was the 4th highest in the nation, Minnesota had the 5th highest level of Medicaid payments per enrollee who was either disabled or aged 65 and older.
Source: Pew Trusts
We cannot furthermore, blame our high level of spending on differences in cost of living. Compared to other states, Minnesota is actually very affordable. According to the Tax Foundati0n analysis of prices, $100 will buy a person $102 worth of goods in Minnesota, meaning Minnesota has a slightly lower cost of living compared to the national average.
In fact, out of all the top 5 states that spent the most on welfare per person aged 65 and older, Minnesota is the only one that is more affordable compared to the national average. California, Massachusetts, New York, and Alaska all have prices higher than the national average.
Source: Tax Foundation
As can be seen, there is no good excuse for our high level of welfare spending; except that our state government wishes to be generous with taxpayers’ money.