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  • How Obamacare is Hastening the Day of Reckoning

    “It’s not like you can avoid it forever, ’cause it’s here now. And we all know it’s here. And the federal government doesn’t have the money to paper over it anymore, either, for the states. The day of reckoning has arrived. That’s it. And it’s gonna arrive everywhere. Timing will vary a little bit, depending upon which state you’re in, but it’s comin’.”

    That’s what New Jersey Gov. Chris Christie told CBS News’ Steve Kroft during his Day of Reckoning story last night on 60 Minutes.

    Kroft goes on to report:

    Not all of the problems that Illinois and other states are facing right now can be traced to the recession. But the precipitous drop in tax revenues did expose decades of financial irresponsibility, reckless spending, unrealistic benefit packages for public employees, and the use of political gimmicks to cover up hidden deficits. It’s forcing state governors and the public to confront some harsh realities.

    Governors of cash-strapped states are beginning to cajole or bully public employee unions into making concessions on what are considered to be gold-plated retirement and health care packages, which are now collectively underfunded to the tune of $1 trillion.

    But as bad as government union contracts and pensions are, they are not the real driver of state insolvency. Medicaid is. Already, Medicaid is the second largest item on the average state budget at 21% (education is first at 22%). But according to the Centers for Medicare and Medicaid Services (CMS) that is all about to change very soon thanks to Obamacare. Remember, more than half of the health care coverage expansion under Obamacare is attained by placing Americans on Medicaid. CMS projects that state and local spending on Medicaid will increase 41.4% between 2010 and 2011. 41%!!! Heritage policy analyst Brian Blaze warns:

    If state Medicaid spending increases by 41 percent as projected by CMS, then by next year Medicaid could end up consuming nearly 30 percent of the average state budget. Medicaid would greatly exceed all other state priorities, including education, which tops state budgets at about 22 percent. In fact, state spending on education would experience certain cuts next year.

    Presumably, the state spending increase is so high because the enhancement of the federal Medicaid match will expire at the end of 2010. CMS projects that federal spending on Medicaid and the Children’s Health Insurance Program will decrease 7.1 percent between 2010 and 2011. The loss of federal funds will drive most of the increase in state Medicaid obligations.

    Unfortunately, states have lost considerable flexibility to reduce Medicaid’s burden on their budgets. As a condition for receiving the additional federal dollars, both the stimulus bill and PPACA contain maintenance-of-effort (MOE) provisions that prohibit states from changing eligibility levels.

    And it only gets worse after 2011:

    Beyond the enormous increase in state obligations for Medicaid next year, more trouble lies ahead. The new law includes a massive Medicaid expansion. CMS estimates that by 2014, 85.2 million Americans will be enrolled in Medicaid—an increase of 23.3 million individuals from the projections under prior law.

    This is the second study in a week that provides unwelcome news to states. Indiana reports that the cost of Medicaid expansion will cost its state $3.6 billion over 10 years. Texas estimated its 10-year cost at $27 billion. The situation could be even worse. State estimates are subject to great uncertainty, especially with assumptions about the take-up rate (the number of people who actually sign up) among both the newly eligible (the federal government reimburses state spending at a rate of 90 percent after 2020) and the previously eligible (the federal government reimburses at the state’s standard match rate).

    Posted in Obamacare [slideshow_deploy]

    26 Responses to How Obamacare is Hastening the Day of Reckoning

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    6. Janice, MD says:

      Sadly, it's not just States, but individuals who are finally coming to this 'Day of Reckoning'. Individuals who bought homes they could not afford, assuming that their salaries would always increase, are facing tough times. Folks who failed to save anything in spite of repeated warnings to set up an 'emergency fund' are finding that they should have listened. And States that made a deal with the devil (Federal government) for short-term gain shall suffer the consequences.

      Karma. You can't escape it.

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    8. George Colgrove, VA says:

      The 2011 budget is estimated to be over $3.8 Trillion.

      Tax grab from the citizens is optimistically estimated to be around $2.5 trillion

      Using these federal produced numbers we will be going into debt by $1.3 trillion.

      So far the deficit spending this year (if continues as it has for the last two months – an average of $145 billion each month) is looking like it will be upwards of $1.7 trillion.

      $1.9 trillion deficit would be 50% of the 2011 federal government budget. If things stay as they are, we are only $200 billion away from funding the government with 50% hard cash and 50% imaginary cash.

      Last year, the feds operated with 36% imaginary cash. Things are spiraling out of control.

      Taxes have gone up in the form of fees and specific smaller taxes. Tax collections keep on declining.

      What more do we need to know? Cuts have to be made in a big way. I do not think cutting the federal government by 10% will have any effect. I think we need to start having a discussion about cutting the size and scope of the federal government by 50%. You are right Conn, "the federal government doesn’t have the money to paper over it anymore,[...] . The day of reckoning has arrived."

      Congress should act immediately on the HF $300 (+) billion cuts in the first week to get the ball rolling. However, this is just a drop in the bucket. We need to cut $1.7 trillion from the $3.8 trillion 2011 budget NOW! We are already three months late on this task.

    9. Mike, Wichita Falls says:

      I can barely detect any federalism in this country. The states would have never entered the union if they knew this would be their lot. How bad must it get for them to leave the union?

      Boehner talks about cutting committee budgets and staff salaries by 5%. McCain talks about cutting earmarks. While these are good, they are painless, like me cutting out my once-a-week lattes. The GOP can't even get the Dems to cut spending elsewhere when extending unemployment benefits another 13 months. Boehner better get ready to make some serious cuts in the 112th. I say go all out. If the voters reject the GOP for it in 2012, then the country is doomed, but I think they will benefit because the people will benefit.

    10. Corky, Howey in the says:

      "We the People" let this happen. We sat on our collective butts and did nothing over the years. We let our elected officials run the show. And run it they did, into the ground. They found a "cash cow" in our tax dollars. A gravy train where they did nothing in return for a "multi million dollar" retirement packages They have made laws and Forced them on us. They have paid bribes to get votes.(something we the people can't do, it's illegal) Spent tax money on "pork" projects. Lied to us. Cheated on us.Now comes Mr Change. He is not for this Country and if your watching what is going on in this Country you will have to agree we are going down the path to ruin and going fast. We had better start praying for God to help us out… Yes, I used the word God!

    11. JGreene New Jersey says:

      ObamaCare must be overturned and FAST! The new Republican Congress must point out the OBVIOUS – a 41% increase to the States can not be handled NOW or in the future.

      ObamaCare is a socialist-Marxist "pipedream" shoved down the throats of a resisting public. Throw ALL POLITICIANS out of office who supported and support this MADNESS.

      The Republicans MUST articulate clearly and strongly the dangers ahead of us if we do not STOP this incredibly STUPID SOCIALIST SCHEME of the Democrats in Congress and the Marxist White House resident.

    12. James Davidson, MO says:

      I recently spoke with a member of the State House of Representatives who happens to be in a power position on the Budget Committee. He confirmed to me the basic point of the above article: that one of the less-well-known features of the ObamaCare Law is that the STATE MEDICAID Expeditures have been 'frozen' in such a way that, while the cost may go UP, the State Government is NOT ALLOWED to REDUCE the benefits they provide. In Missouri—-a state with a Constitutionally-mandated balanced budget (and not a RICH state)—this Federal requirement has resulted in an upcoming $800 million dollar UNFUNDED budget DEFICIT. By STATE LAW, this upcoming year's shortfall MUST be 'made up for' by cutting other areas of the budget and legislators are going at EVERYTHING ELSE with a meat cleaver. One area expected to take a HUGE hit is EDUCATION, but that is not the only area in which major cuts are expected. That is to say, the Legislators are currently working out the details of next year's state budget and they know what's coming but the PUBLIC DOES NOT. At least not yet. Politically, this is absolutely guaranteed to have profound implications in the upcoming 2012 election and the tea leaves are showing ominous implications for Democrats statewide as well as the upcoming Senate race in which Clare McCaskell will seek re-election. She has already broken ranks with Obama on some key features of his agenda but, from our mole's eye view our here in the hustings, unless something DRAMATIC occurs, it won't be enough to save her seat.

    13. Paul, Boston says:

      Here in Massachusetts, Medicaid already consumes over 40% of the state budget. As one of Obama's best buddies, Gov. Hope & Change Patrick got MA a huge $2B bailout under the stimulus plan. It's not returning this year and we have a $2B budget gap (surprise!). I can't imagine what's going to happen if there's a 41% increase in Medicaid.

    14. EconRob says:

      ObamaCare shortfalls is half the story. The other half is the massive deficit created by government guaranteed pensions. Not only do the States not have the money to implement ObamaCare(tm), public sector workers have to get their heads around the fact there is not enough money to pay the pension benefits they are expecting.

    15. cubanbob says:

      I am waiting to see what state is first to opt out of medicaid. If Congress wants to pass an 'entitlement' it is going to have to figure out a way of paying for it instead of passing on the bill to the states. What is Congress going to do? It will collect the payroll tax portion of medicaid from that state and it won't dare deprive the federal portion of medicaid to that state. NJ, call their bluff.

    16. jim smith says:

      Will someone tell John Boehner to leave his scalpel in the desk drawer and grab the heavy duty chain saw? No microsurgery needed in D.C. Instead, start turning over the rocks of the usual suspects, lobbyists and porkers and get rid of the waste, fraud and abuse of and by Congress members. It hasn't been a pretty sight for quite some time, so now, the new folks have a real opportunity to do good for America.

    17. Bob, Ky says:

      "CMS estimates that by 2014, 85.2 million Americans will be enrolled in Medicaid"

      85.2 millions Americans. What about 20 million illegals.

    18. George B says:

      Does everyone here understand that either the expansion of Medicaid under Obamacare gets repealed or the United States splits apart? No way in hell that the voters of Texas will vote to impose a state income tax on themselves to pay for expanded Medicaid and the Texas constitution only allows an income tax to be added by referendum. What happens when a state refuses to comply to a federal unfunded mandate?

    19. John says:

      Illinois and California have the worst state credit ratings in the country.

      Irony will be watching them squirm on the implimentation of the unfunded Medicaid mandate.

      This is going to be a long decade for Democrats because the math isn't there to make this work.

      Maggie Thatcher…."socialism is great until you run out of other people's money".

    20. Daver, Ft. Worth says:

      Anywhere else in the world knowingly writing checks and spending money you don't have is considered illegal–why are the elites in our gov't so comfortable with it?

      Promising pensions and benefits you don't have to, (already in excess of private sector) is just another form of political kickback.

      Not reading and hearing about this daily in the mainstreet media completes the trifecta for corruption and contemptability–and then they wonder why regular people are joining the Tea Party movement?

      Are you kidding or really that stupid?

    21. Tcobb says:

      What happens when a state refuses to comply to a federal unfunded mandate?

      That is a very good question. I suspect we shall know the answer within the next couple of years.

    22. Pingback: Obamacare Makes State Budget Problems Worse | OpenMarket.org

    23. Homer N. Jethro; Gra says:

      Historically when there were only __?__ dollars at any time for medical care, and it was not enough, the Christian hospitals (more than 50% in the USA) simply forgave the debt (or most of it) to those they thought least able to pay as part of their "mission." Now the government will simply remove this dynamic by drastically curtailing the pea-under-the-shell game played by most hospitals to spread costs around among insurance companies to take from those patients who can afford care then give care to those patients who cannot afford it. On an individual/corporate basis this has been the practice for years and many people were helped that couldn't otherwise afford it. Now it seems the people in the representative democracy of the USA would rather let the government ration care and definitely tell people "no" to medical treatment they need rather than let the system that has given the USA more MRI's in Philadelphia than the entire country of Great Britain continue to determine the what, why, when, where of who gets medical care.

    24. Spiritof76, NH says:

      George Colgrove, you are correct. The time for cogitating is over. Start cutting the federal budgets at 10% clip until the tax revenues match the budget. We have to cap the federal budget at 17% of GDP with no provision to override it unless 75% of both houses and 75% of the states approve. Hard spending cap will require the politicians to do the heavy lifting of prioritizing expenses. The lobbyists feeding at the troughs will fight amongst themselves without dragging the taxpayers with them. The elections will fade in importance as the power wanes. We must get rid of the Washington ruling class by reducing the staff of each senator or congressman to two, cutting their salaries to the pay of average American workers and eliminating all of their benefits. This can not wait. It is already too late with trillions of printed money ready to come ashore and with interest rates going sky high- Carter stagflation on the horizon, except much bigger.

    25. Don Levit, Sugar Lan says:

      While Medicaid could certainly be the driver of budget deficits, pension liabilities are not too far behind.

      At least states have only about 23% of their investments in government and corporate bonds for their retirees.

      But the trust funds hold real assets.

      This is in contrast to the federal retirees' retirement plans, which are 100% funded by Treasuries.

      However, to pay out of the trust funds is the same financial process as paying for battleships – out of current revenues and debt. The trust find makes it no easier to pay beneficiaries than if the trust funds didn't exist.

      I can provide objective governmental excerpts and links to support my statements for anyone who is interested.

      Don Levit

    26. Pingback: Obamacare is Already Unraveling {2011 brings many changes} | Just Piper

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