by Jordan Roberts
Director of Government Affairs, John Locke Foundation
A recent editorial by the News and Observer editorial board detailed 5 “goals” which they believe the NCGA should pursue in 2020. Putting aside the fact that most of this list could be mistaken for a Democratic candidate platform, there was one line that struck me.
Goal No. 1, unsurprisingly, of the News and Observer editorial board is to expand Medicaid. However, I was particularly taken back by this line from their explanation of why North Carolina should expand the Medicaid program: “When the history of this era in state politics is written, the Republican lawmakers’ refusal to take the federal government’s offer to pay 90 percent of the cost of expanding Medicaid may be remembered as their cruelest and most financially reckless act.”
Choosing not to expand Medicaid is a “financially reckless act?” Let’s unpack this claim.
To understand the truly reckless part of the Medicaid expansion debate let’s consider how we would pay for this program. The federal government picks up 90% of the tab while the state is responsible for 10% of the cost of the program.
Governor Cooper’s 2019 budget proposal estimates Medicaid expansion would cost $6.3 billion in its first two years. The state would be responsible for $630 million, which would be paid with new taxes on hospitals and Medicaid prepaid health plans. Because of how the hospital tax works, the governor could claim the state would not have to spend its own money from the General Fund.
Just because it may appear to be free to the General Fund, the citizens of North Carolina will pay for this through higher private prices or new taxes to fund the program. Additionally, because we pay for Medicaid on an open-ended basis, we won’t know the true cost of the program until after it’s implemented, which could leave state taxpayers having to pay for the difference between projected and actual costs.
From a federal perspective, there are two essential things to keep in mind. First, supporters of Medicaid expansion like to claim that we are “paying for Medicaid expansion in other states.” This is false. There is no magic pot of money sitting in D.C., which funded by all states and divided up back to only states who have expanded Medicaid. Furthermore, the federal deficit just hit $984 billion in 2019 and continues to grow. Moreover, almost all of the Obamacare funding mechanisms were just repealed by Congress. This means that the law’s spending is funded almost entirely by new debt, which completely negates Obamacare supporters’ claim that the program is budget neutral. If North Carolina were to choose to accept Medicaid expansion, the federal government would appropriate newly borrowed money to pay for this, adding to the current $23 trillion debt.
Finally, there is a question of capacity that must be asked of the Medicaid program. North Carolina’s Medicaid program currently serves over 2 million children, low-income mothers, and individuals who are blind, elderly, or disabled. We have the most people ever enrolled in the Medicaid program during one of the most financially prosperous economies. If anything, it would be financially reckless to expand the program to include possibly an additional 500,000 or more individuals when we have serious issues plaguing the Medicaid program at present. Finally, there is reason to believe Medicaid spending will increase in a future recession and reason to question whether North Carolina’s program could handle the additional spending.
We must be honest about this policy proposal. Which is more financially reckless: rejecting a failed proposal which does nothing to address systemic health care cost problems or expanding a program to the non-traditional population with borrowed money which already serves over one-fifth of our state population? The latter is certainly the more financially reckless move.