It Is Time to Reform Medicaid, Not Expand It

If someone who is sinking deeper and deeper into debt comes to you with an offer of “free money,” you would be best advised to:

A. take the money and run,
B. say thanks, but no thanks, or
C. call the police.

Confronted with the question of whether to accept a multi-billion dollar offer of “free money” from Uncle Sam to expand the state’s Medicaid program, Missouri Gov. Jay Nixon, a Democrat, has advocated the take-the-money-and-run approach. He called it “the smart thing to do,” and “the right thing to do.”

According to Nixon, it would be “dumb” for Missouri, or any other state, to turn down a use-it-or-lose-it infusion of federal cash, and it would be “wrong” for state officials to wave aside money for extending health insurance to the uninsured. On the first point, the Obama administration has agreed to pay a very high share (90-plus percent) of new Medicaid costs in all states. And on the second, it acts as if cost were no object.

This is an unsound argument — and bad public policy. Let’s hope that most states reject it — as Missouri, with large Republican majorities in both houses of the state legislature, almost certainly will.

It is astounding that the administration is contemplating a major expansion in a troubled entitlement program when the nation faces the threat (with the so-called fiscal cliff) of a financial panic and another deep recession.

According to a new study from the Kaiser Commission on Medicaid and the Uninsured, the loosened eligibility for Medicaid under the Affordable Care Act (a.k.a. ObamaCare) will cost in the neighborhood of $1 trillion over the next decade.

For the past several years, the federal government has been borrowing about 40 cents out of every dollar it spends. That is like adding $400 of credit card debt for every $1,000 you spend. So where is the new money coming from to expand Medicaid coverage to a projected 17 million people?

Like a spendthrift who refuses to mend his ways, the Obama administration wants to go on spending money it does not have: If necessary, taking out new credit cards to pay off the old. This is the same tactic that has brought Greece and several other European nations to the brink of bankruptcy.

Instead of acting as enablers of fiscal profligacy, Missouri and other states should say “no” to the Medicaid expansion. They should also say “no” to the creation of state health insurance exchanges to implement ObamaCare. These exchanges would require the states to accept costly mandates and complicated rules restricting competition and choice in health care.

Finally, Medicaid should be reformed, not expanded.

Medicaid costs have been the fastest-growing part of state budgets for more than a decade. In Missouri, Medicaid expenditures jumped from $3.4 billion, or 22 percent, of the state’s total expenditures in fiscal 2000, to 36 percent, or $8.2 billion, in fiscal 2012. Despite the increased outlays, complaints are growing on the part of patients and doctors. Poor patients often have a hard time finding doctors. And doctors say they have little incentive to stay in the program because of reduced reimbursement rates and administrative headaches.

The states should explore better ways of providing catastrophic health insurance for those without coverage. And they should be smart enough to know that the offer of “free money” usually means a one-way ticket to financial ruin.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.