The mother of all unfunded mandates

Now that the Medicare expansion has been stripped from the Democrats’ health care legislation, we would do well to focus on the Medicaid expansion. The legislation would expand eligibility for Medicaid to those whose income equals 133 percent or less of the poverty level. According to Mississippi Governor Haley Barbour, this would add roughly 15 million people to the program. In his state, the increase could be as high as 50 percent.
Where will the money for the expansion come from? Not from the federal government. If the feds were to foot the bill, this would explode the pretense that the legislation is “revenue neutral.” To keep up that pretense, the bill would leave the states to pay for the expansion after the first three years. Gov. Barbour estimates the size of that bill at $25 billion. Call it the mother of all unfunded mandates.
The problem, of course, is that the states cannot afford to pay for the Medicaid expansion. Indeed, many states are already struggling with the cost of Medicaid as it is currently constituted. In Tennessee, for example, Democratic governor Phil Bredesen has capped the state’s program, barring new entrants. Yet the Dems would require a massive expansion.
Most states face balanced budget laws. So unlike the feds, they cannot borrow from the Chinese or from anyone else. Their only options would be to raise taxes or cut services. As a practical matter, they would do both. A significant portion of the budget cuts would have to come from the education portion of the state’s education budget, since that’s where the majority of state money is spent. That’s why Gov. Bredesen has described the options in the event of a Medicaid expansion as putting one’s state “into bankruptcy” or its education system “in the tank.”
The Medicaid expansion would create additional problems beyond cost. For one thing, when people exit from private policies to go on Medicaid, the price of premiums for these policies rises. As a result, many businesses, especially small ones, may well stop offering health insurance to their employees.
For another thing, a Medicaid expansion would exacerbate existing problems of access to Medicaid. Because more than one-third of doctors refuse to accept Medicaid patients, states are having a tough time making sure that those who are currently eligible for Medicaid actually have access to treatment. Imagine the effect on accessibility in the event of a massive expansion of Medicaid.
Obamcare is already unpopular, and the public doesn’t know the half of it. If this legislation passes, it will come to know. The drip-drip of the consequences of Obamacare will feel like torture to state governors and, quite possibly, to many of the politicians responsible for enacting it.

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