EDITORIAL: The $300 million Louisiana purchase

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Sen. Mary L. Landrieu, Louisiana Democrat, provided one of the last two votes needed to bring the government health care takeover to the Senate. She didn’t even blush about selling her vote. “I am not going to be defensive. And it’s not a $100 million fix. It’s a $300 million fix,” Mrs. Landrieu bragged on Nov. 21. This gross windfall will flood into her state through added benefits in the health care bill. This is government at its worst.

Mrs. Landrieu’s big payday shows how useless the Congressional Budget Office’s cost estimates are. Right now, each dollar that Louisiana’s Medicaid program spends is matched by $1 in federal funds. If Senate Majority Leader Harry Reid’s bill passes, each $1 Louisiana spends will be matched by $4 in federal funds. The CBO, falling back on its typical static analysis, assumes that both population coverage and Medicaid payments per beneficiary will remain unchanged. Neither assumption is reasonable.

A similar experiment occurred for Alaska after the 1997 Balanced Budget Act. That act increased the rate at which the federal government matched Medicaid spending from $1 for each $1 spent by the state to $1.50 for each $1 spent. While the increase was nowhere near as bloated as what is being proposed for Louisiana, the effect was dramatic.

Alaskan legislators used the discretion allowed them to increase who was covered and the beneficiary payments per recipient. Per capita Medicaid spending went from growing at the national average to growing at more than three times the national rate. We can only assume that this increased Medicaid use increased overall demand for health care in the Last Frontier and thus raised health care costs for everyone else in the state.

If a 50 percent increase in matching payments had this effect for Alaska, it’s hard to imagine what a 400 percent increase would do to Louisiana’s Medicaid expenditures. Nearly 30 percent of Louisiana’s residents are already enrolled in Medicaid. Even if the number of those eligible were somehow magically not to change, the potential cost of expanded benefits is huge. It boggles the mind that this legislation is being sold as a way to get costs under control.

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