Health Costs Cause College Cost Increase

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College Guide often focuses on the rising price families pay for college, particularly due to declining state support for public higher education. But why does this happen? It’s not because states have just mysteriously become less generous.

According to Peter Orszag, the director of the Office of Management and Budget from 2009 to 2010, it’s all about health care. In a piece he wrote for the New York Times he explains:

Over recent decades, as state governments have devoted a larger share of resources to rising costs of Medicaid, the health care program for the poor, they have cut support for higher education.

Governments’ general support for higher education 25 years ago was nearly 50 percent greater than state spending on Medicaid. If higher education’s share of state budgets had remained constant instead of being crowded out by rising Medicaid costs, it would be getting some $30 billion more than it receives today, or more than $2,000 per student.

That’s right; it appears it’s all about the cost of Medicaid, the health care program for low-income people. Medicaid, which is jointly funded by state and federal governments, acts as a huge drain on the system. Because Medicaid has to be funded, however, states increasingly cut higher education to make this happen.

How can the United States fix this problem? Well, according to Orszag:

One step is to provide more federal support for Medicaid when downturns hit, because that is when states tend to put the squeeze on higher education. The more fundamental response, however, is to get a better handle on rising health care costs.

This is a very interesting point. So much of public funding eventually runs together.

The need to curtail rising health costs is something various pundits discuss here and there, but this problem has a real, direct impact.

And that impact isn’t just confined to health insurance and the medical industry. It looks like it matters for colleges too. [Image via]

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer