by Shawn Mitchell
Originally Published in Townhall Finance
Over many years of door-knocking and community forums in five runs for Colorado’s statehouse, I’ve practiced diplomatically discussing misdirected questions about federal issues above my pay grade (way above, sadly).
But in this critical election, state candidates everywhere have to swing at an urgent fastball delivered by Team Obama-Roberts:
Should your state throw in with the president and significantly expand the Medicaid program as part of his make-over of U.S. healthcare?
Of course, Team Obama-Pelosi didn’t intend to call state lawmakers into the game on that question. But reliever Roberts threw the pitch straight at them when he revised the Patient Protection and Affordable Care Act to save it from a 9th inning run-down. Congress’s original play required states to significantly expand Medicaid benefits, or lose all of Uncle Sam’s matching dollars for healthcare for the poor. That devastating hit was unthinkable for states struggling with mushrooming costs. Their only option was submission. But Roberts brushed off the play, and said Congress can’t cut all Medicaid funding to uncooperative states; just the increased dollars tied to the expanded new benefits. (Someday, Roberts may have to account to a higher power for where he got the authority to re-write the playbook, rather than simply call balls and strikes, but that’s a different column).
The effect of Roberts' playmaking is that state governments, not Congress, will have the last word on a critical piece of Obamacare—growing the Medicaid program. This pushes the discussion of what to do about the healthcare law to a broader audience. States will have to act one way or the other. Every voter in every legislative district in the country deserves to hear whether candidates think this is a good idea and how they will vote.
Statehouse candidates who think thrusting government deeper into healthcare is exactly the wrong kind of reform, especially as the modern world faces fiscal meltdown under the pressure of public entitlements, have a critical opportunity to make their case and to educate voters. Here are some points they might consider:
Shortly after Medicare’s creation in 1965, Congress estimated the program would cost $12 billion in 1990. In reality, the number was $110 Billion. Virtually every projection the government has made about every facet of Medicaid has grossly understated actual costs.
Medicaid is one of the biggest and fastest-growing parts of the national budget and of every state budget. Pouring public money into a good or service doesn’t make it “more affordable”; it just changes who’s paying. Pouring public money into a good or service doesn’t lower costs; it tends to inflate them.
Public programs lack the discipline of market forces based on supply and demand, so government regulators have to invent alternative ways to try to keep costs down. The most common strategy is cutting the reimbursement rates government allows to providers. But Congress has gone to that well too often, with increasingly harmful results. Already, many providers won’t accept Medicaid patients because of the low compensation. It is increasingly difficult for poor people to find basic care; they’re covered on paper, but not in reality.
When providers lose money treating under-funded Medicaid patients, they have to cover their shortfall by charging their insured patients more. That cost shift, from insured patients to government funded patients—rather than the media’s favorite bogeyman, unpaid ER care--is by far the biggest cost shift in healthcare.
Too, expanding public programs worsens other problems in private healthcare. More generous public options drives a problem called “crowd-out,” When public benefits climb higher up the income scale, they make it harder for struggling employers to justify the cost of providing insurance; their employees will be covered anyway. More companies are succumbing to the pressure to drop coverage.
Crowd-out does damage in all directions. Fewer people pay into the actuarial pool that sustains private health coverage, pressing rates even higher. More people fall into the underfunded public program, raising costs there, causing pressure for provider cuts, driving greater cost-shift, and the death spiral continues.
All these issues are critical for the future path of healthcare and for state and federal budgets. 2012 presents a rare and important opportunity for local candidates to engage crucial national questions.