A Fly in the Ointment of Healthcare Reform

I’ve been wondering when someone would point this particular fly of the hundreds covering the ointment that is healthcare reform in the form that it’s making its way through the Congress. Newt Gingrich and Texas Governor Rick Perry point out that the revisions to Medicaid in the bills will be ruinous to the states:

Congress is on the verge of enacting the largest unfunded mandate in American history. At a time when most states are struggling with rising unemployment, declining tax revenue and the worst national economic climate in 30 years, Congress is demonstrating that it is more out of touch than ever.

The Democratic health “reform” bill in the Senate would require states to expand Medicaid to include all people earning up to 133 percent of the federal poverty level, or $29,327 for a family of four. House Democrats want to require expansion to 150 percent of the poverty level, or $33,075 for a family of four. Even Texas, which has a balanced budget and nearly $9 billion in its rainy-day fund, isn’t prepared to absorb this type of blow.

This is something that escapes the CBO assessments of the fiscal impact of these bills. Medicaid is administered by the states (all states currently participating) under guidelines established by the federal government. Responsibility for funding the program is split between the states and the federal government, some states receiving 50% of Medicaid funds, others receiving more. Consistent with its mandate the CBO only grades bills based on the federal spending component. Here’s how Mssrs. Gingrich and Perry assess the impact of the reforms on Texas:

Historically, the federal government has paid an average of 57 percent of state Medicaid costs. In a transparent attempt to bribe governors and state legislatures into accepting 15 million to 20 million new people nationwide onto Medicaid rolls, Congress is proposing a series of additional subsidies to states to cover 90 percent of the costs of the newly mandated populations. In true Washington form, these handouts would be debt-financed, through the generosity of foreign bankers, to be paid back by future generations of American taxpayers.

Expanding the Medicaid program in Texas alone to include an additional 2 million people would cost $20 billion to $30 billion over the next 10 years. Regardless of how that cost is shared between the federal and state governments down the road, we believe that level of new mandated spending is grossly unacceptable.

It’s worth mentioning that the problem of the uninsured is particularly severe in Texas. Indeed, if Texas, California, and Florida (all of which have proportions of unemployed above the national average) were to reduce their proportion of uninsured to the national average, the issue would largely vanish as a political football.

I’d like to see a total budgetary impact statement of the bills making their way through the Congress rather than a federal budget-only statement as we’ve seen so far. My guess is that the numbers would be mind-boggling with much of the pain being applied to state budgets.