When President Obama and his fellow Democrats where trying to sell America on the so-called “Affordable Care Act,” we were promised cheaper health insurance, with better access to care. In reality we have neither.
ObamaCare’s Medicaid expansion is just another broken promise waiting to happen.
As part of ObamaCare, states were encouraged to expand their Medicaid programs to enroll individuals earning up to 138 percent of the federal poverty level. These new enrollees include able-bodied, childless adults; a population that was not intended originally to be served by Medicaid. Part of ObamaCare’s promise is that these new enrollees will have their costs fully funded via the federal government through 2016, then 90 percent of the costs will be covered by Washington indefinitely.
Think that deal sounds too good to be true? You’re probably right.
Former U.S. Health and Human Services Secretary Kathleen Sebelius called ObamaCare’s Medicaid welfare expansion “the most generous federal offer ever put on the table,” but state policymakers should prepare themselves for the likelihood that this is just another, in a long line, of broken promises from Washington.
A new report from FGA tells you why. Simply put, there’s not enough money in the federal budget to withstand such generous Medicaid funding to the states.
Federal taxpayers can expect to pay $588 billion for Medicaid alone by 2025. For comparison, federal taxpayers paid $251 billion for Medicaid welfare benefits in 2012. During the next decade, Medicaid spending is projected to grow significantly faster than either federal revenue or the U.S. economy, eating into other core government priorities.
As the Government Accountability Office said, this is an “unsustainable long-term fiscal path.” Former Chairman of the Federal Reserve Ben Bernanke said that “creditors would stop lending to the federal government,” if we continue down that path.
And Democrats won’t be able to argue that small tax increases can pull us out of this impending crisis.
“The Congressional Budget Office has previously estimated that balancing the budget long-term with tax hikes would require tax rates to more than double on all income tax brackets, but that assumes there would be no economic decline from such massive tax hikes,” which there of course would be. Just look to Europe. No country’s economy can shoulder tax rates that high and continue to be the envy of the world.
Cutting these Medicaid funding rates is inevitable. Congressman Paul Ryan, Chairman of the House Ways and Means Committee says, “The fastest thing that’s going to go when we’re cutting spending in Washington is a 100 or 90 percent match rate for Medicaid. There’s no way.” He warned governors and their legislators that, “ObamaCare’s enhanced funding for Medicaid expansion will not last forever.”
So what does it mean when Washington breaks that promise? It sends more and more of the financial burden down to the states. And the states can’t afford it.
States simply cannot afford to absorb more of these costs. Medicaid is already the largest line-item in state budgets, crowding out resources for other state priorities such as education, tax relief, infrastructure, and public safety. States are already struggling to find the resources necessary to pay for the Medicaid obligations they already have. They cannot afford to make up for Washington’s broken promises, too.
Even President Obama agrees that the “most generous federal offer ever,” is headed for the chopping block.
Obama has actually proposed reductions in the enhanced matching rate on numerous occasions. In his 2013 budget, for example, President Obama proposed shifting more Medicaid costs to the states with a “blended” rate that would ultimately reduce federal support for Medicaid expansion. His proposed blended rate would have more than tripled states’ share of Medicaid expansion costs.
He also made similar proposals during recent debt ceiling negotiations. And he has offered other plans to shift more Medicaid costs onto states, including limits on states’ use of provider taxes to pay for their share of Medicaid spending.
These proposals make clear the president’s willingness to require states to pay more, up to and including changing federal Medicaid matching rates. As one of the two trustees President Obama appointed to oversee Medicare recently warned, it is a “near certainty” that federal support for Medicaid will be cut in future years.
States have seen this before. In 1975, Congress created the Individuals with Disabilities Education Act, which says that states are “required to provide disabled children with appropriate educational services.” States were promised Congress would cover 40 percent of the additional costs needed to educate these disabled children. But, as you can imagine, this is just another broken promise. Nearly 40 years later, “Congress has never actually appropriated the full funding authorized under IDEA.”
This is but one example. Washington already has a history of changing the terms of their Medicaid deal with the states.
The federal government has changed the terms of agreement with states specifically when it comes to Medicaid funding. After President Obama’s stimulus package passed Congress, states agreed to temporarily maintain their current Medicaid eligibility levels in exchange for stimulus dollars. According to the agreement, states were to maintain pre-stimulus eligibility levels until the stimulus money ran out.
However, after the states accepted this agreement, the federal government changed the terms; Congress passed ObamaCare, which prohibited states from changing Medicaid eligibility for adults until 2014 and for children until 2019. While states may have initially benefited financially from the original deal —receiving more than $100 billion from federal taxpayers—they are now stuck with “temporary” rules beyond what they agreed to. States also cannot create any new paperwork or enrollment requirements that would make it more difficult for people to enroll in Medicaid or SCHIP.
In a famous scene from Star Wars: The Empire Strikes Back, Lando Calrissian, who has made a bargain with the evil Darth Vader that puts his friend’s life in the balance, says at a frustrating moment that “This deal is getting worse all the time.”
For states, this Medicaid expansion deal is getting worse all the time.