Many readers no doubt take comfort in living thousands of miles away from the tax and spending misadventures of Illinois or Connecticut. But fair warning: One of the worst deals in state spending is coming to a red state near you, and that’s expanding Medicaid to adult men above the poverty line.
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On Nov. 6 four states will consider ballot initiatives on expanding Medicaid: Nebraska, Utah, Idaho and Montana, the last of which would extend an expansion that is set to expire. More than 30 states have expanded the entitlement as part of the Affordable Care Act. The Republican failure to repeal the law ensured that this number would grow, and Governors of both parties are always eager to draw more money from Washington.
Proponents are working to make sure voters don’t know, but this is not about poor mothers and babies, who are covered by traditional Medicaid. Same for the disabled. Expansion extends the benefit to prime-age adults without children up to 138% of the poverty line. The feds pay more than 90% of the cost for the new beneficiaries, versus about half the tab in Nebraska for the truly vulnerable (closer to 70% in Idaho, Montana and Utah).
The perversity of spending more on childless men than pregnant women is reason enough to reject expansion, but there are others. Every state that has expanded Medicaid has blown the budget by spending more money on more people. The cost overruns are more than double on average.
Montana’s expansion has come in 70% over budget, according to the Foundation for Government Accountability. The state is now proposing to fund its expansion with a tobacco tax, which is impressive cynicism even for politics: Tobacco companies are spending to defeat the measure, and Medicaid proponents can style themselves as champions against products that cause cancer. But revenue from a tobacco tax will decline over time as cigarette use falls. Another tax increase is inevitable.
Utah is proposing to raise the sales tax to 4.85% from 4.7%—yes, a regressive tax on the poor to pay for health care for those above the poverty line. Nebraska and Idaho’s ballot measures leave the funding details for another day, ostensibly because voters might figure out that expansion is more expensive than it appears.
These are merely opening offers. Oregon earlier this year imposed new taxes to fill a hole burned by Medicaid expansion, and Medicaid is already the fastest growing line item in nearly every state in the country. The incentive will be to cut services from the needy who receive traditional Medicaid because it saves states more money.
The Medicaid blowout will also put pressure on funding for cops and kids. In Idaho the compound annual growth rate for Medicaid spending over the past decade or so triples that of schools and roads, as the Idaho Freedom Foundation points out. And that’s before expansion.
The idea that the feds will continue to pick up 90% of the tab forever is fantasy. The GOP has vowed to equalize the funding formula and make states pay closer to 30% to 50% like they do for traditional Medicaid. States shouldn’t assume that Democrats will be more merciful when they want to pay for something else and stick more of the Medicaid bill on states. Democrats tend to discover the wonders of federalism at times that are politically convenient for them in Washington.
Unions and state hospital associations are bankrolling the advertising for the expansion referenda and pitching it as a way to help the poor—a natural extension of Mormon compassion in Utah, for example. But hospitals stand to gain more reimbursement for services, so they’re on board. By the way, Medicaid beneficiaries on all the evidence are more likely to avail themselves of emergency room visits, so forget about bending the cost curve.
Utah voters have been distracted from Medicaid by a ballot fight over medical marijuana, and progressives have been effective in deploying ballot initiatives to do what Governors and legislatures won’t. Nebraska’s legislature has rejected Medicaid expansion six times.
The legislature is right. Medicaid expansion is a bad fiscal and health-care bargain that looks worse as time passes. States like Kentucky are already looking for reforms like work requirements before the “free” money drowns their state fisc. Voters would be wise to reject the phony compassion and focus scarce resources on the poor and disabled.