Do Mergers with State Medicaid Programs Result in Cuts to State Public Health Department Funding?

Dec 9, 2013, 9:00 AM, Posted by

Paula Lantz, PhD, is professor and chair of the Department of Health Policy in the School of Public Health and Health Services at the George Washington University (GW).  Before joining the GW faculty, she was professor and chair of health management and policy at the University of Michigan School of Public Health, where she served as the director of the Robert Wood Johnson Foundation (RWJF) Scholars in Health Policy Research Program. In addition, Lantz is an alumna of the Scholars in Health Policy Research Program. She recently co-authored a study with Jeffrey Alexander, PhD, professor emeritus at the University of Michigan, where he was the Richard Jelinek Professor of Health Management and Policy in the School of Public Health.*


It is not uncommon for state governments to periodically reorganize, and this often involves creating new agencies/departments or consolidating ones that already exist. Some in the health field have voiced concerns about such reorganizations when they involve the consolidation of a state’s public health department and the Medicaid agency. The main fear has been that when public health functions are combined with the invariably larger and growing Medicaid program, public health loses out in terms of economic resources and a sustained focus on disease prevention and health promotion. By virtue of the sheer size and focus on medical care, there would be a “giant sucking sound” of economic resources and priority attention going to the Medicaid program and away from the smaller and often less visible activities of public health.

With funding from the Center for Health Care Research and Transformation (a joint venture between the University of Michigan and Blue Cross Blue Shield of Michigan), our research team conducted a 20-year retrospective study that looked at the relationship between state organizational structures related to key health services and state budget allocations in related areas, including public health and Medicaid. We first constructed a history of the health-related organizational structures of all 50 states between 1990 and 2009, focusing on Medicaid, public health, mental health services, and human services. We then merged this information with annual information from states regarding their budgets, political leadership, and sociodemographic characteristics.

Our research found that consolidating public health and Medicaid departments has occurred with some frequency:  27 states (54%) housed the two functions together at one or more points during the 20-year study period. And when they did so, state budget allocations to public health remained unchanged, taking into account political and demographic characteristics. In fact, our analysis revealed that in states that experienced this kind of merger, the Medicaid program subsequently showed an average 5 percent decline in funding through the state budget process, while public health funding remained the same relative to the size of the overall state budget. This pattern held in the face of continued growth of state Medicaid costs, which comprised on average 16 percent of entire state budgets during the study period.

Our main finding runs counter to the belief that when state governments consolidate public health and Medicaid within the same administrative entity, public health loses out in terms of resources. Our research did not address the underlying reasons for the relative decline in Medicaid funding when it is merged with public health. However, one possibility is that when strong public health departments merge with Medicaid, more attention gets paid to health promotion and disease prevention/management. An effective public health agency might help save the Medicaid program money by preventing costly diseases or health problems before they get a chance to start, or by better managing existing chronic diseases through community-based interventions and culturally-sensitive care.

Although we found no detrimental financial impact on public health departments after a Medicaid merger looking at historical data, our research findings cannot be generalized to the future. With the passage of the Patient Protection and Affordable Care Act (ACA), the Medicaid and public health landscapes within states going forward may look quite different depending upon whether or not they participate in the Medicaid expansion or run their own health insurance exchange. Other components of the ACA, including the investments being made in prevention, community health, and innovations in Medicare/Medicaid, could also have an impact on state priorities and resource allocations.

* The Lantz/Alexander study finds state public health departments do not lose funding when they are merged with larger Medicaid programs. It was published online in the Journal of Public Health Management and Practice. Alexander is currently engaged in health services research as a consultant, including work on the evaluation team for the RWJF Aligning Forces for Quality initiative. The study was co-authored by Christopher Adolph, PhD, associate professor of political science at the University of Washington and former RWJF Scholar in Health Policy Research at the University of Michigan, and JoLynn Montgomery, assistant research scientist at the University of Michigan.

This commentary originally appeared on the RWJF Human Capital Blog. The views and opinions expressed here are those of the authors.