Friday, November 30, 2012

States already struggling to get by will face even tighter fiscal constraints thanks to yet another costly Obamacare mandate. A study last week from the Kaiser Commission on Medicaid and the Uninsured revealed President Obama’s health care takeover would dump $1 trillion in new costs on federal and state taxpayers over the next decade.

By Kaiser’s calculation, following Obamacare’s loosened eligibility conditions for Medicaid could add an additional 10 million people to the rolls of the insured. The tab for this will exceed $1 trillion by 2022 with Uncle Sam picking up $952 billion, leaving states on the hook for $76 billion. That represents a 26 percent increase in federal outlays, but the state share represents modest 3 percent increase — for now. The real crunch will come after 2022, when Uncle Sam is no longer required to foot the bill for the Medicaid expansion.

States have a way out of this budget-busting dilemma. The Supreme Court’s Obamacare ruling earlier this year left it up to the states to decide whether to expand Medicaid under the Obamacare guidelines or not — in return for the federal cash. Governors would be wise to decline Uncle Sam’s white elephant, as they will hard pressed to find enough money in their coffers to cover costs once the federal largesse begins to taper off in 2022.

Medicaid already consumes a quarter of state budgets, on average. In some states it’s either the single largest budget item, or second only to education. Even if states decline to expand Medicaid, other provisions of Obamacare, including the requirement to purchase insurance or face a penalty, will swell Medicaid rolls. The program’s expenses have also soared in the past few years. State Medicaid outlays jumped 20 percent in the last fiscal year on top of a 23 percent increase in the year before that, according to a report from the bipartisan National Governors’ Association. Expanding Medicaid further will put even greater pressure on states already struggling with future deficits and looming pension shortfalls. Whether it’s at the federal or state level, it’s ultimately taxpayers who will wind up paying.

Some of the increase in Medicaid costs at the state level will be offset by decreases in expenses currently created by uncompensated care to the uninsured, as the Kaiser study points out. This is, at best, a short-term offset. The Kaiser study also expects savings from participation in the state exchanges contemplated in the Obamacare legislation that might never materialize. So far, 18 states have categorically declined to create exchanges, and many more have indicated their reluctance to proceed.

Medicaid is extremely costly and rife with waste. It’s reckless to expand such a program so dramatically for the benefit of a small fraction of the population. States should reject Obamacare’s new burden and explore better ways to take care of those who are currently uninsured.


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