States Engaging in Fiscal Madness; opting out of Medicaid expansion (National Journal)

[eShirl]

States Engaging in Fiscal Madness
Opting out of Medicaid expansion does not save money--it opens a drain.
By Henry Aaron
March 18, 2014

http://www.nationaljournal.com/next-america/perspectives/states-engaging-in-fiscal-madness-20140318

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.

(continued)

[Scuba]

1. Scott Walker is literally killing thousands of Wisconsinites by declining the Medicaid money.

[JayhawkSD]

2. It's not a simple as it seems.

The federal government pays the cost of the Medicaid expansion now, but the amount it pays tapers down, and once you opt in you can't opt back out. Some states fear the future burden of their share of that expansion, and even 10% is by no means negligible, and they don't trust the federal government not to change the terms and dump a higher proportion on the states. There is precedent.

The "Texas will still pay for the expansion in other states" is a spurious argument, because that is true whether Texas opts in to the Medicaid expansion or not. That is completely irrelevant to a decision as to whether or not to opt in.

A state which does not opt in is not "losing out on a free money windfall," as the cited piece claims, because the incoming money is not "free money" as in unencumbered; it is committed for one purpose, a purpose not presently being filled by the state. In opting out the state is failing to gain medical benefit for its citizenry, but those medical benefits come with some future costs. Initially the state it ficscally neither better off for opting in or worse off by opting out, since if it opts in it will incur new expenses precisely equal to the new money coming in.

Like you, I don't think opting out is a wise decision, but I don't see declining it as "fiscal madness." The Medicaid expansion a hell of a bargain, but it is fiscally neutral initially, and fiscally negative in the future.