Reject the Medicaid expansion

Published 10:21 am Thursday, August 23, 2012

Medicaid is a mess. It has grown in size and scope in the past 30 years and now, under the Patient Protection and Affordable Care Act, individual states must decide whether to add approximately 20 million more enrollees to the program.

Alabama cannot afford to expand Medicaid and should join fiscally prudent states in rejecting incentives to further bloat the swelling program.

Medicaid was created by the federal government to provide health care coverage to those in need, including the poor and the disabled. The new health care law broadens the criteria for those eligible for benefits to anyone below 138 percent of the federal poverty line. Since Alabama’s current Medicaid coverage for low-income adults stops at just 11.5 percent of the federal poverty line, and a significant proportion of its population is low-income, adopting the PPACA Medicaid eligibility requirements will financially cripple our state.

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Medicaid relies on a “matching grant model” in which the federal government matches state expenditures. At the moment, the federal government pays $2.18 for every $1 of Alabama Medicaid expenditures. If Alabama expands Medicaid to hundreds of thousands of new enrollees, the federal government has promised to cover 100 percent of the costs from 2014-2016. But, starting in 2020, that “match” will drop to 90 cents on the dollar. The generous federal match, which has the appearance of being “free” money, will be irresistible for many state lawmakers.

But, there are no free lunches.

Someone – the federal and state governments (i.e., taxpayers) – will pay the exorbitant costs for new enrollees. Taxes for working Americans across the country will have to increase to cover more enrollees.

According to a 2010 Kaiser Family Foundation report, the Medicaid expansion will result in an additional $693 million of state spending by 2019, which is about $600 in new taxes for a family of four. Alabamians pay enough in taxes, and our economic recovery will be threatened if more taxes are introduced to cover the Medicaid expansion.

The Supreme Court gave states the freedom to reject the expansion, and Alabama should use this freedom to opt out. If, however, lawmakers choose to expand Medicaid coverage, somewhere between 351,000 and 456,000 Alabamians (7 to 10 percent of our population) will be added to Medicaid and total enrollment will rise from 20 percent of the state’s population to 30 percent.

Medicaid expenditures in Alabama already consume 36.5 percent of our General Fund expenses, and they will consume more than half of our state budget by 2019 if the program is expanded. Paying for the program will force lawmakers to make hard choices about other spending priorities: education and police spending, for example, will have to be cut to support a 50 percent increase in Medicaid enrollment or a large tax increase will have to be passed.

Higher taxes correlate with lower growth, less job creation and slower increases in median incomes. And, as we’ve seen with Medicaid over the last 30 years, spending tends to rise, which means taxes will only go up higher and higher beyond 2019 if the expansion moves forward.

In the long run, the costs to taxpayers from the Medicaid expansion will be enormous, and devastating for economic growth and prosperity.

The Patient Protection and Affordable Care Act is flawed in its goal of attaining affordable, universal health care for all Americans. It relies on a tried and failed entitlement program – Medicaid –to make health care available to more Americans.
The result of Medicaid expansion will be higher taxes, lower quality care and a health care system that steadily increases in cost. The Medicaid expansion should, therefore, be rejected. Alabamians deserve better.

Scott Beaulier is executive director of the Manuel H. Johnson Center for Political Economy at Troy University. Email: