The Magazine

The States Should Say No

. . . to ‘free money’ for Medicaid expansion.

Dec 24, 2012, Vol. 18, No. 15 • By ANDREW B. WILSON
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If someone who is sinking deeper and deeper into debt comes to you with an offer of “free money,” you would be best advised to:

A sketchy deal from Uncle Sam

A sketchy deal from Uncle Sam

Gary Locke

(a) take the money and run,

(b) say thanks, but no thanks, or

(c) call the police?

That is the big question facing governors and lawmakers in the 50 states: Should they accept or reject a multi-billion-dollar offer of “free money” from Uncle Sam to expand their Medicaid programs?

Missouri governor Jay Nixon, a Democrat, ducked the question when he was campaigning for a second term. Newly reelected, he announced in late November that he advocates the take-the-money-and-run approach. He called it “the smart thing to do” and “the right thing to do.”

According to Nixon, it would be “dumb” for Missouri, or any other state, to turn down a use-it-or-lose-it infusion of federal cash, and it would be “wrong” for state officials to wave aside money for extending health insurance to the uninsured. The Obama administration has agreed to pay a very high share (90-plus percent) of new Medicaid costs in all states through 2022. That compares with the usual split between the federal government and the states of about 60-to-40 in Medicaid funding.

But Nixon also admitted that he didn’t know where the money would come from to fund a major expansion of Medicaid—except that it would come out of federal rather than state coffers. And there’s the rub.

It is astounding that the Obama administration is contemplating a major expansion of a troubled entitlement program when the nation faces the threat (with the so-called fiscal cliff) of a financial panic and another deep recession.

According to a new study from the Kaiser Commission on Medicaid and the Uninsured, the loosened eligibility for Medicaid under the Affordable Care Act (aka Obamacare) will cost in the neighborhood of $1 trillion over the next decade.

For the past several years, the federal government has been borrowing about 40 cents out of every dollar it spends. That is like adding $400 of credit card debt for every $1,000 you spend. So where is the new money coming from to expand Medicaid coverage to a projected 17 million people?

Like a spendthrift who refuses to mend his ways, the Obama administration wants to go on spending money it does not have: if necessary, taking out new credit cards to pay off the old. This is the same tactic that has brought Greece and several other European nations to the brink of bankruptcy.

Instead of acting as enablers or codependents in an act of fiscal irresponsibility, Missouri and other states should say “no” to the Medicaid expansion. It is, after all, the people of Missouri and other states who will one day have to pay the debts that the federal government accumulates.

The states should also say “no” to the creation of state health insurance exchanges to implement Obamacare. These exchanges would require the states to accept costly mandates and complicated rules restricting competition and choice in health care.

It is not as if there were any kind of a mandate for Obamacare in the recent elections. According to exit polls, 49 percent of voters said they favored full or partial repeal of the law, while only 44 percent favored keeping it. When Obamacare was passed by Congress on March 21, 2010, it did not receive a single Republican vote. A total of 34 Democrats in the House also voted against this manifestly unpopular law, which led to the “shellacking”—as President Obama famously called it—that Democrats received in the November 2010 midterm elections.

As it was originally written, the Affordable Care Act would have required each of the states to comply with the planned expansion of Medicaid or face a loss of all federal matching funds. The Supreme Court struck down that part of the law in its decision in late June of this year. “The financial ‘inducement’ Congress has chosen is much more than relatively mild encouragement,” Chief Justice John Roberts wrote. “It is a gun to the head.”

Republican governors are in office in 30 out of the 50 states, and Republicans have unified control of state legislatures and governorships in 24 states, while only 13 are under unified Democratic control. In addition, Republicans continue to control a majority of the seats in the House, which has the power of the purse in spending and appropriation bills.

With those numbers, it is clear that proponents of full-scale implementation of Obamacare are not riding a bandwagon that cannot be stopped. With a “gun” no longer held to their heads, the governors of nine states (Alabama, Georgia, Louisiana, Maine, Mississippi, Oklahoma, South Carolina, South Dakota, and Texas) have already said they will not participate in the expansion. According to one tracking service, governors in 24 other states are listed as undecided or leaning against participation.

In my home state of Missouri, the leaders in both houses of the legislature (with large Republican majorities) say they are prepared to disregard the governor’s wishes by refusing to participate in the Medicaid expansion and refusing to set up state insurance exchanges.

Medicaid should be reformed, not expanded. Medicaid costs have been the fastest-growing part of state budgets for more than a decade. In Missouri, Medicaid expenditures jumped from $3.4 billion, or 22 percent of the state’s total expenditures in fiscal 2000, to $8.2 billion, or 36 percent, in fiscal 2012. Despite the increased outlays, complaints are growing on the part of patients and doctors. Poor patients often have a hard time finding doctors. And doctors say they have little incentive to stay in the program because of reduced reimbursement rates and administrative headaches.

The states should explore better ways of providing catastrophic health insurance for those without coverage. And they should be smart enough to know that the offer of “free money” usually means a one-way ticket to financial ruin.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for public policy in Missouri.


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