States complain that they will suffer in the budget sequesters, but they themselves have a lot to say about how much money the federal government has available to spend.
If every state declined to expand its Medicaid coverage under President Obama’s health care law, it could offset a large chunk of the budget cuts that went into effect March 1.
The federal government would have to dole out roughly $525 billion from 2013 to 2022 to the 24 states — plus the District of Columbia — that are actively considering the expansion under the Affordable Care Act, a number that balloons to $952 billion if all the states were to expand the health entitlement program for the poor, according to a Washington Times review of the nonpartisan Kaiser Family Foundation’s decision-tracker and state-by-state Medicaid study by the Urban Institute.
The latter figure comes close to the total amount of sequestration spending cuts, and the feds’ 10-year tab for expanding Medicaid in large-population states such as California and New York — roughly $85 billion each — would account for this year’s sequester cuts alone.
To be sure, states are not about to band together and reject one of the key pillars of Mr. Obama’s signature domestic achievement to stave off the indiscriminate cuts totaling $1.2 trillion over nine years, or $984 billion when assumed debt-service savings are included in the calculation, according to the Congressional Research Service.
Numerous governors, including eight Republicans, have thrown their political weight behind the expansion and are lobbying state lawmakers to approve their plans, and any attempt on Capitol Hill to repeal all or part of “Obamacare” is destined to fail in the Democrat-controlled Senate.
But budgeting is about setting priorities for the nation, and Americans are starting to see the impact of sequester cuts to border security, social programs and other facets of daily life.
Allowing states to opt in or out of a massive amount of federal spending is a novel situation, but the Supreme Court made it that way when it upheld Mr. Obama’s health-care law in June. In its closely watched ruling, the high court said states would not lose their existing Medicaid funds from Washington if they chose not to extend the benefits to those making 138 percent of the federal poverty level, as envisioned by Mr. Obama’s law.
“It’s an extraordinary situation and an extraordinary expansion,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office and current president of the American Action Forum, a conservative think tank.
He said sacrificing the Medicaid expansion as a way to offset the sequester — given their ostensibly equal dollar amounts — did not make it to the bargaining table amid intense wrangling over the nation’s debt in 2011.
“It never came up,” he said. “I think that’s the political realities rearing their ugly head.”
Under Mr. Obama’s law, the federal government will pay for 100 percent of the Medicaid expansion from 2014 to 2016 before scaling down its contribution to 90 percent by 2020.
Some state leaders say the expansion will bust their budgets in future years, while others do not want to reject the influx of federal dollars, hoping to insure their poorest residents while improving health outcomes and driving down costs of care in the long term.
Republican governors Jan Brewer of Arizona and Rick Scott of Florida have bucked fellow conservatives by supporting the expansion. As part of their justification, they said federal tax dollars from their states would fund expansions in other states whether they opted in or not.
While that is true, states that opt to expand Medicaid will not get additional money simply because other states decided to forgo the funds. The money is either spent or not spent, and there is no diffusion of extra dollars from the states that left the money on the table.