Payne: Expand Michigan Medicaid … or else

Posted by hpayne on February 12, 2013

“The federal government isn’t going to protect the states that didn’t expand,” said Michigan Budget Director John Nixon last week in explaining before incredulous Michigan lawmakers why a Republican administration was partnering with the Obama White House to voluntarily expand the voracious Medicaid program to 133 percent of the poverty line.

The Snyder administration? The same nerds that made corralling long-term state liabilities their No. 1 budget priority have now embraced Medicaid expansion, the mother of all long-term liability threats?

But while Gov. Rick Snyder’s plan faces opposition from his own party, it is also a rational decision given the raw political power that Obamacare wields. That coercion is already on display in Washington’s forced insurance mandate on individuals and forced contraceptive mandate on religious institutions. Nixon’s candor exposes the further threat of nationalized health care to the bottom lines of state governments and businesses — and the staggering bill to the federal taxpayer as those entities offload their costs to Washington.

“This makes sense for the physical and fiscal health of Michigan,” said the relentlessly positive governor in announcing Medicaid expansion to 470,000 Michiganians. “Expansion will create more access to primary care providers, reduce the burden on hospitals and small businesses, and save precious tax dollars.” In truth, Snyder’s expansion is a political calculation to transfer costs to Washington (where money apparently grows on trees) and position the state for the inevitable cost overruns of the future.

Medicaid has long given states spending discretion, but nationalization is narrowing those options. For example, Michigan has opted to provide mental health coverage for Medicaid recipients even as it has only covered citizens up to 50 percent of the federal poverty line. By agreeing to Obamacare’s Medicaid expansion, Michigan has negotiated to offload all mental health costs to Washington at a savings of $200 million a year (which Snyder would put in a savings account to cover its estimated $1.3 billion-by-2022 Medicaid expansion costs).

Furthermore, Washington will cover 100 percent of the costs of Michigan’s expansion of Medicaid to 133 percent of the federal poverty line for the first few years, but the state will have to pick up 10 percent of the costs by 2020. But that still leaves a “gap,” as state Medicaid analyst Farah Hanley puts it, of 250,000 residents caught between Michigan’s 50 percent of poverty coverage and the feds’ 100-plus percent.

No sweat. Washington picks up that tab, too — bringing the federal commitment for covering just Michigan’s expansion to a breathtaking $2.5 billion a year in perpetuity (and that’s assuming correct estimates in a program notorious for cost overruns. Example: In 1987, Medicaid’s bill for hospital relief program was projected at $1 billion by 1992. Actual cost: $17 billion).

Isn’t Snyder cautious about hooking up with such an unreliable business partner? After all, the White House has already floated the idea of welching on its 90 percent-by-2020 match for a “blended” share instead. The Heritage Foundation calculates that this would balloon Michigan’s commitment to $2.8 billion a year by 2022 instead of the anticipated $1.3 billion. Goodbye, Michigan savings account.

That’s where Nixon’s comment about the feds only protecting states that expand comes in. If and when costs explode, Michigan will need protection.

“Expansion will create more access to primary care providers, (reducing) the burden on hospitals,” says Snyder. But he surely knows that is unlikely. Indeed, Massachusetts has seen hospital visits increase since Romneycare brought a similar state Medicaid expansion. Why? Chronic doctor shortages — caused by Medicaid only reimbursing doctors at 60 cents on the dollar — force patients to emergency rooms for treatment.

Significantly, Snyder made his expansion announcement flanked by hospital and business representatives. Big Hospital was one of the primary lobbies behind Obamacare because — you guessed it — health care reform sends them more federal dollars. And Michigan businesses, like the state, are badly exposed to Obamacare’s mandates. If the state doesn’t expand Medicaid to 133 percent of poverty, businesses will be mandated to cover the costs.

Under Obamacare’s protection racket, states and businesses — which must balance their budgets — shift their costs to Washington. At least until 2045 when, Heritage calculates, entitlements consume all federal revenue. Then what?

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