Obamacare Bankrupting States
Sen. Ben Nelson’s “Cornhusker Kickback” for Nebraska may have given Harry Reid his coveted sixtieth vote, but it comes at a price for the other states, states that are already feeling the hammer of rising Medicaid costs.
Just coming to light is a concern that has been giving governors heartburn for months: the fact that states are going to be hit with a monstrous financial burden with the passage of Obamacare, and none are in a position to handle it.
President Barack Obama intoned ominously just last week that “the federal government will go bankrupt” unless his federal takeover of health care passes Congress. Few believe the rising costs resulting from this health care bill will be much of a protection against bankruptcy. One thing is for sure, though: passage of the health care bill with a massive expansion of Medicaid will bankrupt the states.
Ohio spends 39 percent of its state budget a year on Medicaid. Massachusetts spends 27 percent. On average, states fork over 20 percent of their annual spending on this joint state-federal program that originally began to assist women and children in poverty and the disabled.
Now Congress is considering the inclusion of a massive expansion of Medicaid in the Obamacare bill, one that will dump about 18 million Americans into a program that, according to a broad consensus, provides substandard medical coverage. Nelson claims he urged Sen. Reid to drop the Medicaid provision, but since that is the foundation for Reid’s bill, he isn’t going to do it. Hence Nelson’s sweetheart deal. Exempting Nebraska won’t kill the bill. Exempting all the states would.
Who is going to get stuck with half the price tag? The states. Well, the states minus Nebraska. And probably Nevada, where Reid is trying desperately not to get the voters’ boot. Reid and other deal makers are trying to camouflage the impact, saying the federal government will pay more of a percentage for new enrollees, but within five years the responsibility would fall entirely on the states — states which even now cannot meet their Medicaid responsibilities. Draft bills include a provision that in the event that the federal government cannot make its payments to the states, the states would be required to make up the difference.
With new federal oversights, states will no longer be able to manage their own participation in Medicaid, such as setting standards for who is eligible for Medicaid. The feds will use the regulations to substitute its own judgment for the states on numerous issues, including on eligibility. As it stands now those making somewhere between 133 and 150 percent of the poverty level, or around $30,000 will become eligible.
To gauge the impact of the new financial burden on states, take a look at New Hampshire. Currently, New Hampshire state government pays only for the children of Medicaid eligible families whose income is less than 66 percent of the federal poverty level. The health care bill would, at a minimum, double the income families could earn and still be eligible for Medicaid. Florida would see its Medicaid rolls grow to 4 million (from 2.6 million) at a cost of $1.6 billion.
Dealing with the most severe economic crisis since the Great Depression, 48 states are already in the red — in many cases due to their own profligacy — and they expect to be facing even larger deficits next year.
The Congressional Budget Office forecasted that the expansion of Medicaid would add about $37 billion to states’ expenses. How would states pay for the increased costs? Cut services, including education, and yes, increase tax.
Those tax increases would be piled on top of several hundred million in federal tax hikes currently being bandied about to pay for the government’s power grab on health care. All this coming from a president who promised not to raise taxes on anyone making less than $250,000.
Legislators have been getting an earful from the states on the devastating consequences of expanding Medicaid, but they aren’t letting that stop them. Or even slow them down.
Sen.Lamar Alexander (R-Tenn.) has been outspoken in his advocacy for the states, but he has garnered little attention. He didn’t hold back when he said, “Any senator who votes to expand Medicaid and transfer the costs on to the states ought to be sentenced to go home and serve as governor for a few years and try to implement the Medicaid program which is bankrupting states and forcing funding cuts that will ruin public higher education.”
Governor Bredesen, the Democratic governor of Tennessee, said his state will get hit with a price tag of $1.4 billion over the next five years. He said, “That’s real money. How much money? Enough for a new state income tax or to do serious damage to higher education in Tennessee — or both.” Vermont Governor and National Governors Association President Jim Douglas said the health care overhaul would be a "tremendous financial liability" and does not "respect that no one size fits all at the state level." He added, "Unlike the federal government, states can’t print money."
In essence, expanded eligibility for Medicaid, and the increased price tag that goes with it, means the federal government will not only be placing unbearable financial burdens on the states, but it will also be imposing its will on state decision making in how to direct more than a quarter of their finances. That is a new and unthinkable perversion of the federal government’s proper role as it relates to the states.
Dennis Smith and Edmund Haislmaier of the Heritage Foundation believe that if Congress passes a bill that essentially takes away the states’ authority to manage their participation in the program, “states will likely take the rational and reasoned approach of simply ending the state-federal partnership known as Medicaid.”
Well, there we go. An unlikely scenario, but one the states have a responsibility to evaluate, considering the alternatives. Is it possible for states that don’t get sweet deals, such as Nebraska’s, to opt out? In theory, yes — state participation in Medicaid is entirely voluntary, a fact many in Congress would like to ignore. So while liberals in Congress continue on their bizarre course toward not only a federal takeover of health care, but a takeover of the states, they are forgetting that in this case, states hold the trump card. If they want to avoid bankruptcy, they might just decide to use it.