Easy money from the federal government is hard to resist. After all, it’s “free.” A key section of Obamacare makes states the offer they can’t refuse: Expand eligibility for Medicaid on an unrealistic scale, and Uncle Sam will hand over a big, fat check. A number of Republican governors have succumbed to this temptation, including Chris Christie in New Jersey, Rick Scott in Florida and Rick Snyder in Michigan. This is a dangerous bargain for us all.
States that extend Medicaid coverage to adults whose income is up to 138 percent of the poverty line will get the federal government to pick up the added costs — for the first three years. After that, the feds promise to pick up 90 percent of the tab forever. The states that choose to expand Medicaid this way will leave states like Louisiana, Wisconsin and North Carolina, which have declined the extension, subsidizing others. This is setting up trouble later.
Medicaid is already the largest item in state budgets, and the extension makes the program bigger. Big-ticket items like primary schools and transportation are cheap by comparison to Medicaid, which on average soaks up a quarter of state budgets. The Center for Medicaid and Medicare Studies estimates that the total increase in Medicaid expenditures over the next decade will amount to 158 percent under the best-case scenario.
States are foolish to fall for the administration’s promise to pick up the tab for 90 percent of the expansion. With all the lavish promises it has been presenting, the U.S. government can’t make good on all its future obligations. Federal entitlement spending is growing rapidly and is projected to consume an increasing share of revenue. Years of trillion-dollar deficits have sharply increased the burden of public debt, and will roughly double the debt service burden to 3.3 percent of the gross domestic product by 2023. Paying for Social Security, Medicare and debt service leaves nothing to cover the extravagant promises of Obamacare. Inevitably, state taxpayers will be stuck with the bill.
The Medicaid expansion illustrates the toxic combination of short-term incentives and crony capitalism that is traveling the road taken by Greece and Spain. Rep. Paul Ryan, the chairman of the House Budget Committee, offers an alternative that avoids these perverse incentives. He proposes to follow the successful welfare reform model by moving to a block grant system, which changes the incentives. Under the current system, states look to maximize enrollment in the program to seize every federal dollar possible. Block grants would reward states for innovations that suit the particular needs of their residents. The House has already adopted this Medicaid reform in its budget, but the idea failed to catch the attention of the Democrats who run the Senate, or of President Obama.
Governors would better serve their constituents by advocating block grants, rather than sticking their successors with a bloated bureaucracy that will push everyone over that fiscal cliff.
The Washington Times