by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The offer, which Obama will include as a legislative proposal in his 2017 budget, is that any state that expands Medicaid will get the first three years of expansion free — paid for entirely by the federal government. As written, the law says that Medicaid expansion in a given state will be paid by the feds for the first three years, beginning in 2014, and after that the state gradually picks up an increasing share of the tab until by 2020 the federal government will be paying only 90 percent. Obama is proposing to extend the three years of full federal funding to states regardless of when they expand, which means those 19 non-expansion states are still eligible for 100 percent federal funding should they follow Louisiana’s lead.
The purpose of this little twist on the Medicaid expansion deal is to give President Obama a fighting chance to claim victory for his otherwise failing health-care law. Full federal funding for three years would mean potentially billions of federal taxpayer dollars for holdout states like Texas and Florida, where large numbers of poor, uninsured adults enrolling in Medicaid would mean a revenue windfall for Medicaid providers and managed-care organizations. Those special interests, the White House no doubt realizes, will now redouble their efforts to persuade state lawmakers and governors to cave.
But these state officials should resist the temptation, for at least three reasons. First and most obvious is that expansion states have all experienced the same thing: More people signed up than expected, and it blew a hole in the states’ budgets. …
… The second reason is that there’s no such thing as “free” federal dollars. The money comes with conditions, which effectively shifts policymaking from the receiving state’s legislature and governor to a distant federal bureaucracy (in this case, the Centers for Medicare & Medicaid Services), which dictates how states must spend federal Medicaid funds. The so-called “cooperative federalism” scheme under which programs like Medicaid operate is designed for one purpose: to transfer as much federal funding to states as possible in order to impose uncompetitive liberal policies in those states. …
… The third reason is less abstract: Medicaid will harm those it’s meant to help. Often lost in the expansion debate is that Medicaid is the worst form of health coverage in the country.