ObamaCare shoves costs onto states

Barack Obama and his allies in Congress insist that their plans to overhaul the American health-care system won’t increase the federal deficit.  So far, the CBO begs to differ, but even if one accepted that premise, it does nothing but shove costs off to the states.  According to the Wall Street Journal, the Medicaid expansion on which both HR3200 and the Baucus plan in the Senate is predicated will create massive budget crises in all 50 states:

Democrats want to use Medicaid to cover everyone up to at least 133% of the federal poverty level, or about $30,000 for a family of four. Starting in 2014, Mr. Baucus plans to spend $287 billion through 2019—or about one-third of ObamaCare’s total spending—to add some 11 million new people to the Medicaid rolls.

About 59 million people are on Medicaid today—which means that a decade from now about a quarter of the total population would be on a program originally sold as help for low-income women, children and the disabled. State budgets would explode—by $37 billion, according to the Congressional Budget Office—because they would no longer be allowed to set eligibility in line with their own decisions about taxes and spending. This is the mother—and father and crazy uncle—of unfunded mandates.

This burden would arrive on the heels of an unprecedented state fiscal crisis. As of this month, some 48 states had shortfalls in their 2010 budgets totaling $168 billion—or 24% of total state budgets. The left-wing Center for Budget and Policy Priorities expects total state deficits in 2011 to rise to $180 billion. And this is counting the $87 billion Medicaid bailout in this year’s stimulus bill.

While falling revenues are in part to blame, Medicaid is a main culprit, even before caseloads began to surge as joblessness rose. The National Association of State Budget Officers notes that Medicaid spending is on average the second largest component in state budgets at 20.7%—exceeded only slightly by K-12 education (20.9%) and blowing out state universities (10.3%), transportation (8.1%) and prisons (3.4%).

This accomplishes two tasks for Democrats in Congress and Barack Obama in the White House.  It shifts the costs off of the federal books, which allows them to hide a large increase in public spending for ObamaCare that won’t get covered by the illusory “savings” they predict.  Shoving more people into Medicaid also means that the states will have to enact large tax hikes or cut services elsewhere, placing all of the political risks on governors and state legislators while looking like Santa Claus inside the Beltway.

One might expect to hear screams of outrage from the state capitals, but Baucus has a plan for that, too.  His plan will temporarily raise payments to the states:

Mr. Baucus hopes to use his printing press to bribe the governors, at least for a time. Currently, the federal government pays about 57 cents out of every dollar the states spend on Medicaid, though the “matching rate” ranges as high as 76% in some states. That would rise to 95%—but only for five years. After that, who knows? It all depends on which budget Congress ends up ruining. Either the states will be slammed, or Washington will extend these extra payments into perpetuity—despite the fact that CBO expects purely federal spending on Medicaid to consume 5% of GDP by 2035 under current law.

Either way, taxpayers will have to foot these costs.  Regardless of whether the taxes come in the form of federal or state taxes, governments at some level will have to increase revenues to pay the bills.  States will have much less flexibility on how to manage the process, thanks to the federal mandates of Medicaid built into the ObamaCare legislation.

In short, it’s easy to be Santa Claus when someone else pays the bills.