Has Snyder’s Obamacare expansion mortgaged Michigan’s future?

Posted by hpayne on September 3, 2013

Rick Snyder, Randy Richardville, Brian Calley

Michigan Gov. Rick Snyder has gained the bipartisan support of Michigan’s Legislature for his Medicaid expansion. He is flanked here by Senate Majority Leader Randy Richardville, left, and Lt. Gov. Brian Calley. (Carlos Osorio / AP)

Gov. Rick Snyder’s emergency management of Detroit is focused on rescuing the city from decades of bad management that bet unsustainable entitlements on future tax receipts and state revenue sharing. But with his Medicaid expansion has the governor put Michigan on course for unsustainable entitlement spending?

The Michigan Legislature’s bipartisan approval of Snyder’s expansion of Medicaid coverage to 133 percent of the poverty line last week was a rational decision given Obamacare’s threat to small businesses and the federal government’s promise to cover near-term expenses . The governor’s party grimaced at embracing a cornerstone of Obamacare, but Snyder is a businessman first, conservative second, and he struck a deal with Washington that he thinks will protect Michigan’s immediate fiscal and business interests.

In selling his bargain, however, Snyder missed an opportunity to explain to taxpayers the enormous long-term liabilities they have shouldered. The Medicaid deal is a short-term solution that, like Detroit’s past largesse, puts the state at long-term risk well after Snyder & Co. have left office.

“The federal government isn’t going to protect the states that didn’t expand,” said Michigan Budget Director John Nixon in explaining the gun that Washington has put to states’ heads.

Why would a governor expand a program already devouring the state budget? Begin with the $2,000 penalty businesses must pay per employee that enter Obamacare exchanges — but no penalty if employees qualify for coverage for Medicaid’s expansion.

In addition Washington will cover 100 percent of the billions it will cost Michigan to expand Medicaid to these 470,000 residents (until 2020 when the state picks up 10 percent of the costs). In a business deal Snyder is most proud of, Washington also agreed to cover the $200 million a year Michigan currently spends to provide mental health coverage for Medicaid recipients. Snyder will take that $200 million and place it in a “savings account” to cover the 10 percent portion of Michigan’s future Medicaid commitment.

“Noncompliant states face a double whammy — lose federal money and expose their businesses to additional taxes (the $2,000 penalty),” explains Shikha Dalmia, a senior policy analyst at the Reason Foundation.

Lansing’s made a slick deal for the near future. But what happens if Washington’s purse runs dry? After all, Detroit once counted on state guarantees for revenue sharing. But as Lansing dealt with its own fiscal problems (driven by Medicaid and pension entitlements), promises to Detroit evaporated.

State aid to Detroit peaked at $334 million in 2002, dropping in half by 2012. “There was nothing but a handshake deal on the revenue sharing part,” Mitch Bean, former director of Michigan’s House Fiscal Agency, told USA Today about Michigan’s 1999 promise to Detroit for more revenue sharing. “Detroit has always thought they got mistreated with that, and they probably did.”

Promises, promises. As Washington’s debt crisis deepens, are its promises to Michigan any more sound?

By 2025, projects a 2011 Congressional Budget Office report, every dollar in the federal budget will go toward servicing the national debt and the Medicare, Medicaid and Social Security entitlements. As pressure on Washington for fiscal restraint grows, its promises to states like Michigan will shrink.

Since 1992, Medicaid hospital costs have been 17 times higher than predicted. Since the mid-1980s, Michigan’s Medicaid costs have grown from 5 to 25 percent of its budget. Yes, Snyder has cut a good deal with this White House. But what about the next? Or the next administration?

Snyder might have explained the risks.

Even this White House has suggested a blended share of Medicaid costs, which the Heritage Foundation calculates would explode Michigan’s portion to $2.2 billion a year by 2022 instead of the anticipated $800 million. Goodbye savings account.

But Michiganians are sure to feel the negative effects of Medicaid expansion well before then. That’s because Snyder & Co. have just doomed thousands of citizens to America’s worst health program. A recent Oregon study, echoing similar reports, found that Medicaid patients had no better health outcomes than if they didn’t use Medicaid. Why? Because Medicaid only pays 60 cents on the dollar, meaning few doctors will treat Medicaid patients, meaning patients get crisis care at hospitals (that will now receive billions from Obamacare — no wonder the Big Hospital lobby cheered last week).

Yet Snyder has tried to put a happy face on Medicaid expansion by calling it “Healthy Michigan” that will “will make our state healthier.” There is no evidence to support that claim. Massachusetts, for example, has seen hospital visits increase under Obamacare’s twin, Romneycare.

Obamacare forces governors like Snyder to put immediate political realities ahead of the long-term interest of taxpayers. That’s the kind of short-term thinking that landed Detroit in bankruptcy.

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