25 States, Unfortunately, Expand Medicaid

October 29, 2013

In a controversial (and possibly illegal) move, Ohio's Controlling Board voted to expand Medicaid coverage in the state to adults that were not previously eligible by way of accepting billions in federal funds, says Nick Gillespie, editor in chief of Reason.com, writing for the Daily Beast.

That means 25 states, plus the District of Columbia, have now signed on to take part in an aspect of the Affordable Care Act that is both optional and ill-considered. More states are expected to follow suit, even some that, like Ohio, have Republican governors and conservative legislatures.

Like Medicare, Medicaid has for a long time posted year-over-year spending increases.

  • Between 2000 and 2011, the average increase was 6.8 percent and total expenditures on the program came to $432 billion in 2011.
  • The Department of Health and Human Services estimates that annual increases will average about 6.4 percent until 2021, when the federal government and states will spend $795 billion on the program.

By that time, too, the states will be on the hook for 10 percent of costs for the Medicaid expansion on top of other increases in the program; if past projections of the cost for federal health care programs are any indication, expect the estimates for the cost of the Medicaid expansion-and Obamacare more generally-to be way short.

  • Indeed, in 2012 the CBO doubled its cost estimate for the first full decade of Obamacare, from $938 billion to $1.76 trillion.

To be sure, the prospect of a $9 federal match for every $1 of state spending seems like a win-win proposition for states. But the Cato Institute's Michael Cannon notes that given increasing amounts of federal debt and other entitlement spending, "It is wildly unrealistic to assume the federal government will maintain the Medicaid expansion's nine-to-one matching rate."

As Mercatus Center economist Veronique de Rugy reminds us, increases in federal spending to the states don't reduce state-level spending.   Research indicates that for every dollar of federal aid that disappears from state coffers, states raise their future taxes by between 33 cents and 42 cents.

The states that have thus far refused to expand Medicaid are actually thinking more clearly about where taxpayers will be a decade from now.

Source: Nick Gillespie, "The Great Medicaid Swindle," The Daily Beast, October 24, 2013.

 

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