NCPA - National Center for Policy Analysis


September 30, 2009

The Senate majority leader, Harry Reid of Nevada, has secured a special deal protecting his state against the costs of expanding Medicaid under one of the major health care bills moving through Congress.

Reid, a Democrat, complained about the impact on Nevada when the chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, unveiled his bill on Sept. 16.

Now Baucus has modified the bill to spare Nevada and three other states, and Reid, who faces a potentially difficult race for re-election next year, is taking credit for getting a "major increase" in federal money for his state.

  • The Senate bill, like a companion measure in the House, would expand Medicaid to cover childless adults, parents and other people with incomes less than 133 percent of the poverty level, or $29,327 for a family of four.
  • The federal government would pay most of the new costs -- anywhere from 77 percent to 95 percent, with a higher share in poorer states, in the first five years.
  • Under Baucus's original proposal, the federal government would have paid 87 percent of the new costs in Nevada; under the modified version, the federal government would pay 100 percent of the new costs for the first five years.
  • Severe financial problems have prompted Nevada and other states to cut spending and furlough workers, and some states have even considered releasing prison inmates to save money.

All of the versions of ObamaCare currently in Congress cover more uninsured Americans by expanding Medicaid.  But the Baucus bill keeps its total price tag below $1 trillion by shifting the most cost to the states.  As the Heritage Foundation wrote shortly after the Baucus bill was released:

  • Under the Baucus bill, there is no real relief for states in the cost of the current program.
  • States will still face a steep budget cliff in December 2010 when the federal matching formula for Medicaid payment expires.
  • Adding additional costs through expansion of eligibility and benefits is adding people to a sinking boat.
  • Even with the federally financed enhanced match rates, states will still face increased costs; so will individuals and families.   

The Baucus bill also fails to provide the states with the flexibility they desperately need to manage their current program in an effective and cost-efficient manner, says Heritage.

Source: Robert Pear, "Majority Leader Protects Home State," New York Times, September 29, 2009.

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