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  • Time to Stop the Medicaid Bailouts

    This week Congress, in its consideration of HR 4213 (American Jobs and Closing Tax Loopholes Act of 2010) is going to tap into taxpayers wallets once again to bailout Medicaid, a government health program administered by the states for the poor and the indigent. Many governors are feverishly lobbying for a six-month extension of the Medicaid bailout to their states. The first bailout was enacted in the so-called Stimulus Bill, the American Recovery and Reinvestment Act (ARRA) of February 2009. But if the Medicaid bailout is continued, Congress will add another $25 billion to the national debt.

    Propping up the Status Quo. Meanwhile, states won’t make necessary budget cuts, delaying their return to fiscal sanity. Congress will refuse to pay for this additional spending with budget cuts elsewhere because they will deem it an ‘emergency’, which under the Congressional “pay-as-you-go” rules exempts this bailout from being “paid for”.

    Over the past few decades, states have generally increased Medicaid programs by increasing eligibility and extending benefit packages. When bad times hit, enrollment swells. States have avoided dealing with their mismanagement of the program because they depend on Congress to force federal taxpayers to bail them out. During this decade, Congress has already bailed out state Medicaid programs 3 times.

    For the states, Medicaid is a voluntary program. But all states administer Medicaid programs because federal taxpayers provide generous financial support. Typically, federal taxpayers pay half of the Medicaid bill for the wealthiest states and up to 80 percent of the bill for the poorest states. Even so, Medicaid consumed 21 percent of state spending in 2009.

    Congress bails out these state programs by hiking the federal Medicaid reimbursement rate – called the Federal Medical Assistance Percentage (FMAP). As part of the ARRA, each state’s FMAP was increased by at least 6.2 percent. This resulted in an $87 billion windfall for state governments. This $87 billion was not offset with reductions in other government spending; it was simply placed on Uncle Sam’s credit card. At the end of December, the first funding expansion runs out, which is in the middle of most state’s fiscal years. Many states have already budgeted for the six-month extension of the FMAP increase and would be faced with further budget cuts without the extension.

    Higher Deficits. Ordinary Americans express a rising anxiety about Washington’s already enormous budget deficits. According to a recent Washington Post/ABC News poll, 56 percent of Americans disapprove of the President’s handling of the budget deficit. Indeed, this year’s deficit year is projected to be well in excess of $1.5 trillion. Additionally, 69 percent of Americans feel that the Stimulus Bill either hurt or made no difference to economic recovery. Given the failure of the ARRA to stimulate the economy, combined with the already enormous budget deficits, Congress has no business making matters worse.

    The Governors, after getting the first bailout, can be expected to make impassioned speeches about horrific budget cuts if Congress doesn’t enact the enhanced FMAP. But some perspective is in order. First, Medicaid spending has risen rapidly for the past two decades. Between 1990 and 2007, Medicaid spending more than quadrupled from $69 billion to $316 billion. Second, state spending has also skyrocketed.

    Table 1 shows the changes in state per capita spending between 1990 and 2006. This table shows that the average increase in per capita state spending was 130 percent and that 43 states more than doubled per capita spending between 1990 and 2006. The truth is that many state governments pursued reckless fiscal management over the past two decades, accompanied by the dramatic growth in state Medicaid programs. In fact, states have accumulated much budget fat that can be further trimmed.

    More money from Washington will guarantee one thing: States will continue to spend far in excess of what they can afford, and Congress will treat the federal taxpayers like an ATM machine to cover the shortfalls. Because raising taxes is unpopular and the vast majority of states have balanced budget requirements, state politicians look to Congress, knowing that Congress can always “borrow” the extra money. By refusing to extend the FMAP enhancement, Congress can send the signal that it is serious about excessive spending. Congress can end the era of Medicaid bailouts. State budgets will no longer be brought to balance by racking up additional mountains of debt on our children and grandchildren.

    The next step is to cope with the impact of Obamacare, which will exacerbate Medicaid’s budgetary pressures. The reason: over half of individuals who gain insurance coverage will be enrolled in Medicaid. Additionally, the millions of individuals who are now eligible for Medicaid but who have not enrolled will have an incentive to sign up in order to avoid the penalty of the new law’s individual mandate. While the initial state burden for covering the newly eligible populations will be relatively minor, states will be on the hook for a much greater cost for currently eligible individuals who enroll. Obamacare, in other words, is deepening the mess. Meanwhile, Congress can do the right thing: Stand up for the American taxpayer by refusing to extend the Medicaid bailout.

    Posted in Obamacare [slideshow_deploy]

    7 Responses to Time to Stop the Medicaid Bailouts

    1. Jason says:

      Brian Blase, apparently you were not an English major. Among other things, the term 'ATM machine' is the epitome of redundancy, and feels like the sound of nails screeching down a chalkboard.

    2. Pingback: » Financial News Update – 06/10/10 NoisyRoom.net: The Progressive Hunter

    3. Summer, Topeka KS says:

      I live in a state who's budget depends on the FMAP extension. I work as a Case Manager and Legislative advocate for people with disabilities. I can assure you that in my state there were no further cuts to be made. Painful and deadly cuts have already been made to the Medicaid programs in Kansas. This extension is necessary to keep many states from sliding back into a recession. It is estimated that over 900,000 would be lost nationwide if this extension doesn't pass. I'll bet "ordinary Americans" will agree that's not good for our country. While you're busy twisting facts and glossing over reality, please keep in mind that people with disabilities, people who live in poverty, and children benefit directly from these programs but each of us benefits when the least among us have a better standard of living. I would also like to point out that Medicaid beneficiaries are "ordinary Americans". They are our brothers, sisters, mothers, fathers, grandparents, friends, and neighbors. It would be good for you to realize that.

      • tony m says:

        How noble is it to steal from one group of people to give to another group in the name of compassion. It is time to put the compassion back into the hands of families and faith based organiztions to take care of those who are less fortunate. The problem is that when you force anyone to go give up their labor and give it to those who do not labor for it creates an expectation or entitlement mentality to others people labor. The most compassonate way to deal with this issue is for people to be held accountable for themselves and their own families. Give the citizens the choice of donating money to public programs instead of taking it. The funny thing is when you steal from people who work it lessens their ability to take care of their own families but the liberals see that as compassion. I have worked in social services for 15 years it is a joke.

    4. NICOLE LEBLANC says:

      I would argue that we that we need to keep the

      going. The disability community can not take any more back breaking budget cuts.

      We want to be included in the community and not live in institutions/ nursing homes.

      FREE OUR PEOPLE!!!!!!!!!!!!!!!! INCLUSION Is a Birthright!!!!!!!! We are tired of always being the first ones to get cut! Give us support so that we can make a living and contribute to society!!!!!!!!!!!!

    5. Pingback: Government Bailouts Must End « Defund & Disobey

    6. Pingback: Congressional Gimmicks leave Doctors and Taxpayers in a Lurch | Fix Health Care Policy

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