D. Dowd Muska


The Monster That Ate State Budgets

February 10, 2011

Call it the overlooked atrocity of ObamaCare.

The headline-grabbing objection to the “Patient Protection and Affordable Care Act,” the “reform” the president signed into law nearly a year ago, is the individual mandate. Crushed by courts and abandoned by several Democratic senators facing reelection, the requirement that all citizens obtain health insurance appears destined for a well-deserved execution.

But there’s another key provision of ObamaCare that deserves to be dispatched: the expansion of Medicaid.

A breathtakingly naïve product of the Great Society’s trillion-dollar blundering, Medicaid was crafted, in BusinessWeek’s description, “to help poor mothers and their children.” Almost immediately, eligibility rules widened, causing costs and caseloads to soar. In 2009, enrollment stood at a jaw-dropping 47.8 million people. That’s 15.6 percent of all Americans. While it still covers kids and parents who’ve fallen on hard times, a huge portion of Medicaid’s budget is devoted to the elderly. The Wall Street Journal observed that the program was “never intended as a middle-class entitlement or as inheritance protection for the children of well-off seniors.” But that’s what it’s become -- “spend down” and get taxpayers to finance your golden-years needs. Shielding income and shedding assets is now pervasive. U.S. Social Security Administration research shows that Medicaid paid “over 41 percent of the total cost of care for persons using nursing facility or home health services in 2005.”

The average non-disabled, non-elderly recipient is cheaper for taxpayers to assist than the typical oldster. (Pediatrician visits, broken legs, and eye exams aren’t nearly as expensive as round-the-clock support.) But Medicaid doesn’t offer quality and choice for children and working-age adults. In his reform plan for the nation’s long-term fiscal crisis, U.S. Rep. Paul Ryan Ryan (R-WI) explained that its providers “are paid based on bureaucratically determined formulas that do not reflect the market. As a result, fewer and fewer … are willing to participate in the program, meaning longer lines for beneficiaries, fewer operational clinics, and insufficient care.” Reason’s Peter Suderman noted that multiple researchers have documented the lousy performance of socialized medicine for the poor: “Numerous studies show that, on an array of specific maladies, Medicaid’s health outcomes are dismal -- and in some cases worse or no better than the outcomes for individuals who lack health insurance entirely.”

Runaway spending, unintended consequences, inferior value. Doesn’t sound like an entitlement worth expanding, does it? Tell that to the White House. ObamaCare envisions the addition of 15 to 20 million people to Medicaid.

Fiscally conservative governors are understandably dismayed at the prospect of hiking Medicaid rolls, because the healthcare behemoth has a unique financing structure. Forty-three percent of its costs are borne by the states. About a decade ago, it surpassed K-12 government education as the biggest state expenditure.

The Great Recession has supercharged Medicaid’s appetite for revenue. Last month, The Boston Globe reported that the Bay State’s lawmakers appropriated $9.6 billion for Medicaid in the current fiscal year. But since adoption of the budget, they’ve had to supply another $587 million to keep the program solvent -- with six months to go until the start of fiscal 2012.

Boston, Carson City, Tallahassee, Austin, Harrisburg -- unlike D.C., their legislators can’t run multi-decade deficits. The Obama administration has pledged to pay for most of Medicaid’s new enrollees, but savvy governors are skeptical. With the federal government approaching insolvency, they realize that financial promises from Washington are worth as much as the IOUs in Social Security’s “trust fund.”

Expense-cutters at the federal and state levels are investigating a Medicaid block-grant proposal. Akin to the 1996 restructuring of Aid to Families with Dependent Children -- commonly known as “welfare reform,” although dozens of subsidies that claim to help the poor remain on the books -- limits would be placed on federal funding of Medicaid. In exchange, states would be freed from many of Washington’s mandates. Vermont could continue to move forward with its asinine scheme to establish a single-payer system. Pro-taxpayer states could impose time limits and behavior requirements (e.g., no “free” services for smokers, drunks, and tubbies who refuse to change their ways), as well as stricter standards for eldercare costs.

Although no one’s advocating it yet, ultimately, the goal should be withdrawal of all federal funding for Medicaid. Fully liberated from Washington, medi-welfare would better reflect states’ beliefs, if any, about the proper role of government and the consequences of irresponsible choices.

In the battle for healthcare freedom, toppling ObamaCare remains job one. After the victory, ending Medicaid as we know it must be on the to-do list.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

# # # # #