NCPA - National Center for Policy Analysis

How ObamaCare Burdens Already Strained State Budgets

November 17, 2010

The Patient Protection and Affordable Care Act (PPACA) puts cash-strapped states in a tenuous position, forcing them into one or more unattractive policy choices: cut spending in crucial areas (such as public safety and education) to compensate for the additional health care costs, raise taxes to fund the new spending, or borrow money to pay the bill and sink further into debt.  Given the political and economic challenges associated with higher taxes and more debt, it is likely that states will choose the least of three evils and make even deeper budget cuts, says Lanhee Chen, a visiting scholar at the University of California at Berkeley's Institute of Governmental Studies.

Several states have initiated their own estimates of PPACA's impact.

  • Texas recently concluded that the Medicaid expansion may add more than two million people to the program and cost the state up to $27 billion in a single decade.
  • The Florida Agency for Health Care Administration estimated in April 2010 that PPACA's Medicaid expansion would require an additional $5.2 billion in spending between 2013 and 2019, and more than $1 billion a year beginning in 2017.
  • In California, the Legislative Analyst's Office concluded that PPACA's Medicaid expansion will likely add annual costs to the state budget in "the low billions of dollars."

In every crisis there is opportunity -- state policymakers should act quickly to seize it, says Chen.

  • First, state lawmakers should focus on cutting or holding constant all discretionary spending.
  • Second, states should proactively enact their own health care reforms that focus on controlling costs, improving quality, and expanding consumer choice and market-based competition.
  • Finally, state lawmakers should demand that federal officials be held accountable for dumping billions in unfunded liabilities onto states.

Source: Lanhee Chen, "How ObamaCare Burdens Already Strained State Budgets," Heritage Foundation, November 10, 2010.

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