<\/p>\n
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)<\/p>\n
Gov. Rick Snyder\u2019s 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?<\/p>\n
The Michigan Legislature\u2019s bipartisan approval of Snyder\u2019s expansion of Medicaid coverage to 133 percent of the poverty line last week was a rational decision given Obamacare\u2019s threat to small businesses and the federal government\u2019s promise to cover near-term expenses . The governor\u2019s 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\u2019s immediate fiscal and business interests.<\/p>\n
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\u2019s past largesse, puts the state at long-term risk well after Snyder & Co. have left office.<\/p>\n
\u201cThe federal government isn\u2019t going to protect the states that didn\u2019t expand,\u201d said Michigan Budget Director John Nixon in explaining the gun that Washington has put to states\u2019 heads.<\/p>\n
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 \u2014 but no penalty if employees qualify for coverage for Medicaid\u2019s expansion.<\/p>\n
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 \u201csavings account\u201d to cover the 10 percent portion of Michigan\u2019s future Medicaid commitment.<\/p>\n
\u201cNoncompliant states face a double whammy \u2014 lose federal money\u00a0and<\/i>\u00a0expose their businesses to additional taxes (the $2,000 penalty),\u201d\u00a0explains<\/a>\u00a0Shikha Dalmia, a senior policy analyst at the Reason Foundation.<\/p>\n Lansing\u2019s made a slick deal for the near future. But what happens if Washington\u2019s 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.<\/p>\n State aid to Detroit peaked at $334 million in 2002, dropping in half by 2012. \u201cThere was nothing but a handshake deal on the revenue sharing part,\u201d Mitch Bean, former director of Michigan\u2019s House Fiscal Agency,\u00a0told USA Today<\/a>\u00a0about Michigan\u2019s 1999 promise to Detroit for more revenue sharing. \u201cDetroit has always thought they got mistreated with that, and they probably did.\u201d<\/p>\n Promises, promises. As Washington\u2019s debt crisis deepens, are its promises to Michigan any more sound?<\/p>\n