Medicaid Expansion: Put It on My Tab
Sequestration will reduce the rate of growth in federal spending, but it nonetheless presented something of a predicament for budget hawks.
On the one hand, we at Citizens Against Government Waste (CAGW) were unapologetically in favor of the sequester cuts. After all, the total amount of spending “cuts” scheduled to take effect March 1 amounted to just 2.4 percent of total federal outlays in fiscal year (FY) 2012. Further, those “cuts” represent reductions in projected spending, not a spending reduction from the year before. The federal government will spend more money in FY 2013 than it did in FY 2012, and in FY 2014 it will spend more than it did in FY 2013. Lather, rinse, repeat.
On the other hand, the sequester will make cuts in a way that draws no distinction between good and bad programs. It also exempts the main drivers of the deficit and the national debt, including Social Security, Medicare, and Medicaid. Together those programs make up 44 percent of federal outlays, an amount that is slated to rise dramatically in the coming decades due to rising health care costs and an aging population. The sequester therefore leaves untouched the programs most in need of reform. However, in the wake of the sequester a different issue is attracting headlines: the provisions of the 2010 Patient Protection and Affordable Care Act (ACA), which is attractive to progressives because it expands the programs that so recklessly ignored by the sequester.
In the case of Medicaid, the low-income health insurance program that made enough improper payments in FY 2010 ($23 billion) to fund the entire State Department, the solution to higher spending is evidently more spending. In FY 2014, Medicaid eligibility will be expanded to cover persons under the age of 65 and earning up to 138 percent of the federal poverty level.
According to a November 2012 Kaiser Commission on Medicaid and the Uninsured report, that expansion will cost $808 billion by FY 2022. For a bill that is supposedly going to “cut costs” and reduce the deficit, $808 billion seems like a lot of money. In fact, when the Supreme Court ruled in 2012 that individual states could opt out of the ACA’s new eligibility rules, many of them seemed likely to do so, since expanding Medicaid means more state spending. Instead, the federal government has presented an attractive deal to states: for the first three years after the ACA’s enactment, the federal government will match every dollar states pay under the expanded Medicaid program. After that, just 10 percent of state Medicaid payments will go unmatched.
As a result, governors who had been critical of the ACA, like Florida’s Rick Scott, New Jersey’s Chris Christie, and Arizona’s Jan Brewer, have agreed to participate in Medicaid expansion. As the Washington Post’s Wonkblog put it on February 26, “when it comes to the Medicaid expansion, the lure of federal dollars may trump anti-Obamacare politics.”
The Kaiser report found that even if every single state eventually agrees to the terms of the ACA, states will pay just $8 billion of the Medicaid expansion’s $808 billion price tag. But 10 percent of a huge number is still a very large number, and there has been speculation that some states may be counting on future modifications to the law which could eventually relieve them of the Medicaid burden down the road. If not, those bills will come due after most sitting governors are long gone. Put another way, the federal government has intentionally created what can only be described as a tragedy of the commons. Like trawlers overfishing from a common stock, it is in the interest of each individual state to scoop up as much federal cash as possible while it can, even if the result causes the country to accelerate even faster toward bankruptcy.
— Luke Gelber
