Opinion

States Engaging in Fiscal Madness

Opting out of Medicaid expansion does not save money—it opens a drain.

Henry Aaron is a Senior Fellow in Economic Studies at the Brookings Institution.
National Journal
Henry Aaron
March 18, 2014, 5:40 a.m.

I have de­cided to hang out a shingle as a polit­ic­al con­sult­ant. I’ll deal in sure-fire pro­pos­als, ones that voters can­not res­ist, ones that are guar­an­teed to en­hance their pop­ular­ity.

So, here’s my first. I’ll ad­vise elec­ted of­fi­cials to tell voters in their states that they are go­ing to help the pub­lic lose bil­lions of dol­lars that are leg­ally theirs.

I know what you are think­ing: Keep your day job. Ad­vice like this is trans­par­ently crazy. Well, maybe it is. But gov­ernors and le­gis­latures around the na­tion are be­hav­ing as if they didn’t think so. Texas Gov. Rick Perry is telling his con­stitu­ents it will be in their in­terest to forgo bil­lions of dol­lars every year — an es­tim­ated $9.2 bil­lion in 2022. Flor­ida Gov. Rick Scott is telling his con­stitu­ents they should by­pass up to $5 bil­lion in 2022 that will be right­fully theirs. In Vir­gin­ia, the gov­ernor and the state Sen­ate want to ex­pand Medi­caid and pick up as much as $2.8 bil­lion in that year to which the state can eas­ily lay claim, but the House of Del­eg­ates says “no.”

What sort of mad­ness is this? Fisc­al mad­ness, it surely is. But wheth­er it is polit­ic­al mad­ness re­mains to be seen.

What is go­ing on here? The an­swer is that all states have the op­tion of ex­pand­ing Medi­caid. If they do, fed­er­al rev­en­ues will pay for all the cost at first and nev­er less than 90 per­cent. Be­cause res­id­ents of no state pay more than a tiny frac­tion of total na­tion­al taxes, tax­pay­ers in oth­er states will pick up most of the ad­ded cost of Medi­caid ex­pan­sion. In fact, even if state of­fi­cials re­buff the Af­ford­able Care Act’s Medi­caid ex­pan­sion, Texas res­id­ents will have to pay for Medi­caid re­cip­i­ents newly en­rolled in those states that do ex­pand cov­er­age. So even if Texas for­goes ad­di­tion­al pay­ments to its hos­pit­als, phys­i­cians, nurses, nurs­ing homes, and oth­er health-care pro­viders by re­fus­ing to ex­pand Medi­caid, Tex­ans will still have to pay for ad­ded cov­er­age in oth­er states. And, oh yes, some scores of thou­sands of Texas res­id­ents — a dis­pro­por­tion­ate share of whom are black, Latino, and un­in­sured — will be de­prived of care that could re­duce pain, save their lives, and keep them healthy enough to work or go to school.

Where does the es­tim­ate come from that says Texas will be kiss­ing off $9.2 bil­lion by 2022? Simple. That is the es­tim­ated dif­fer­ence between the pay­ments that will flow to Texas if the state ex­pands Medi­caid and the ad­ded taxes that Tex­ans will pay to cov­er their share — 8.6 per­cent of the na­tion­al rev­en­ues that will be needed to pay for the ad­ded spend­ing gen­er­ated by Texas when it ex­pands Medi­caid cov­er­age. One can re­peat the same ex­er­cise for Flor­ida, Vir­gin­ia, and each of the oth­er 20 states that have so far been un­will­ing to ex­pand Medi­caid cov­er­age. That is just what Sherry Glied, a pro­fess­or at New York Uni­versity, did for The Com­mon­wealth Fund.

The arith­met­ic is straight­for­ward. The polit­ics are an­oth­er mat­ter. Turn­ing down bil­lions of dol­lars that will in­crease in­comes, ser­vices, and the health of one’s con­stitu­ents seems de­ranged. It is cer­tainly clear evid­ence, if any re­mains needed, of the fury and teeth-grind­ing frus­tra­tion that Obama­care’s op­pon­ents are ex­per­i­en­cing. It has caused be­ha­vi­or that can only be de­scribed as odd.

If you are still not con­vinced, con­sider the pro­pos­al ad­vanced by a South Car­o­lina le­gis­lat­or to use state rev­en­ues to pay fed­er­al fines im­posed on state res­id­ents who re­fuse to buy health cov­er­age that will, in many cases, be made af­ford­able by tax cred­its paid for by the fed­er­al gov­ern­ment — which is to say, by res­id­ents of oth­er states. If South Car­o­lina simply ex­pan­ded Medi­caid to more of its un­in­sured res­id­ents, the state’s tax­pay­ers would pay less than 1 per­cent of the ad­ded total cost of health care re­form.

As they say in New York, go fig­ure!

Henry Aaron is a seni­or fel­low in eco­nom­ic stud­ies at the Brook­ings In­sti­tu­tion.


HAVE AN OPIN­ION ON POLICY AND CHAN­GING DEMO­GRAPH­ICS? The Next Amer­ica wel­comes op-ed pieces that ex­plore the polit­ic­al, eco­nom­ic and so­cial im­pacts of the pro­found ra­cial and cul­tur­al changes fa­cing our na­tion, par­tic­u­larly rel­ev­ant to edu­ca­tion, eco­nomy, the work­force and health. Email us. Please fol­low us on Twit­ter and Face­book.

What We're Following See More »
TAKING A LONG VIEW TO SOUTHERN STATES
In Dropout Speech, Santorum Endorses Rubio
2 days ago
THE DETAILS

As expected after earlier reports on Wednesday, Rick Santorum ended his presidential bid. But less expected: he threw his support to Marco Rubio. After noting he spoke with Rubio the day before for an hour, he said, “Someone who has a real understanding of the threat of ISIS, real understanding of the threat of fundamentalist Islam, and has experience, one of the things I wanted was someone who has experience in this area, and that’s why we decided to support Marco Rubio.” It doesn’t figure to help Rubio much in New Hampshire, but the Santorum nod could pay dividends down the road in southern states.

Source:
‘PITTING PEOPLE AGAINST EACH OTHER’
Rubio, Trump Question Obama’s Mosque Visit
2 days ago
WHY WE CARE

President Obama’s decision to visit a mosque in Baltimore today was never going to be completely uncontroversial. And Donald Trump and Marco Rubio proved it. “Maybe he feels comfortable there,” Trump told interviewer Greta van Susteren on Fox News. “There are a lot of places he can go, and he chose a mosque.” And in New Hampshire, Rubio said of Obama, “Always pitting people against each other. Always. Look at today – he gave a speech at a mosque. Oh, you know, basically implying that America is discriminating against Muslims.”

Source:
THE TIME IS NOW, TED
Cruz Must Max Out on Evangelical Support through Early March
2 days ago
WHY WE CARE

For Ted Cruz, a strong showing in New Hampshire would be nice, but not necessary. That’s because evangelical voters only make up 21% of the Granite State’s population. “But from the February 20 South Carolina primary through March 15, there are nine states (South Carolina, Alabama, Arkansas, Georgia, Oklahoma, Tennessee, Kentucky, Mississippi, and North Carolina) with an estimated white-Evangelical percentage of the GOP electorate over 60 percent, and another four (Texas, Kansas, Louisiana, and Missouri) that come in over 50 percent.” But after that, he better be in the catbird’s seat, because only four smaller states remain with evangelical voter majorities.

Source:
CHRISTIE, BUSH TRYING TO TAKE HIM DOWN
Rubio Now Winning the ‘Endorsement Primary’
2 days ago
WHY WE CARE

Since his strong third-place finish in Iowa, Marco Rubio has won endorsement by two sitting senators and two congressmen, putting him in the lead for the first time of FiveThirtyEight‘s Endorsement Tracker. “Some politicians had put early support behind Jeb Bush — he had led [their] list since August — but since January the only new endorsement he has received was from former presidential candidate Sen. Lindsey Graham.” Meanwhile, the New York Times reports that fueled by resentment, “members of the Bush and Christie campaigns have communicated about their mutual desire to halt … Rubio’s rise in the polls.”

Source:
7 REPUBLICANS ON STAGE
Carly Fiorina Will Not Be Allowed to Debate on Saturday
1 days ago
THE LATEST

ABC News has announced the criteria for Saturday’s Republican debate, and that means Carly Fiorina won’t be a part of it. The network is demanding candidates have “a top-three finish in Iowa, a top-six standing in an average of recent New Hampshire polls or a top-six placement in national polls in order for candidates to qualify.” And there will be no “happy hour” undercard debate this time. “So that means no Fiorina vs. Jim Gilmore showdown earlier in the evening for the most ardent of campaign 2016 junkies.

Source:
×