Californias recent budget deficits will look bush league relative to the fiscal hurricane that federal health reform will unleash on California and many other states. I made that prediction in this space on December 2, but as we approach 2010 Californians should know that things are actually worse than I anticipated.
The problem stems from the expansion of Medicaid, the program for low-income residents, jointly funded by the federal and state governments. Most observers anticipate that if President Obama does sign a bill this year, it will look more like the Senate bill (an amendment to H.R. 3590), which would pull millions of Americans into government dependency for their access to medical services via an expansion of Medicaid.
The Congressional Budget Office (CBO) reckons that 15 million more people will enroll in Medicaid if the Senate bill becomes law. Thats just a whisker less than half the total number of persons the CBO forecasts will be newly insured, 31 million, as a result of the reform. This is like the government stating that it will reduce the number of jobless by putting millions more on welfare and classifying them as employed.
From 2014 through 2016, the federal government would cover the entire cost of roping these people into Medicaid. By 2019, however, the federal government would pay only about 90 percent of the costs of Medicaid expansion, leaving the states to pick up 10 percent. Thats how it was supposed to work, until we learned about elements in the bill such as the Cornhusker Kickback.
Senate Majority Leader Harry Reid bought Senator Ben Nelsons vote in favor of the bill by promising that Nelsons state of Nebraska would never have to pay for any of the Medicaid expansion. The federal government or, more properly, the taxpayers of California and 48 other states, would pay for Medicaid expansion in Nebraska. Similar deals for other senators were labeled the Louisiana Purchase and the Florida Flim-Flam.
Some governors are getting pretty uncomfortable with the way the deal has been hammered out. In a pre-Christmas letter to Speaker Nancy Pelosi, Governor Schwarzenegger charged that the federal plan levied an unfunded mandate on California that would cost the state $4 billion to $5 billion. But it gets worse.
Many states, including California, have long since convinced the federal government to allow them to increase Medicaid eligibility. Of course, this has allowed them to draw down even more federal dollars. (Before the February 2009 stimulus bill, the federal government paid for 57 cents of each Medicaid dollar, on average.) Because these states have already bloated their Medicaid programs, they will not enjoy the bailout the federal reform offers states that have limited Medicaid enrollment to date.
One of the 24 measurements in the U.S. Index of Health Ownership is the level of Medicaid eligibility. A state scores low if it has recklessly expanded government dependency in this way. In the third edition (2009), California ranks 30th out of 50 states but plenty of states do worse. Consider New York, a lowly 45th in the Indexs measurement of Medicaid eligibility.
We are, in a sense, being punished for our own charity, moaned Governor David A. Paterson, in response to the proposed Medicaid funding formula. Charity is an interesting noun to describe the Empire States approach to Medicaid. Last July, New York State and New York City agreed to pay the federal government $540 million to settle allegations from the U.S. Department of Justice that they had submitted false Medicaid claims! A December 26 audit by state Comptroller Thomas DiNapoli accused the states health bureaucrats of recently approving $92 million in fraudulent payments.
Wendy Saunders, New Yorks Deputy Secretary of Health, now shamelessly suggests a heaping plate of New York Pork. She thinks the federal government should throw an extra $30 billion New Yorks way over 10 years, above whats currently in the Senate bill. Unfortunately, in order to convince its stenographers in the media that the reform is deficit neutral, the majority took such drastic steps as proposing a luxury tax on tanning salons and cutting about $400 billion from seniors Medicare benefits.
All this comes in order to fund a significant expansion of government, a plan supposedly too big to fail. Governor Schwarzenegger and long-suffering taxpayers will soon learn, however, that the feds are unlikely to find the dollars for a California Cash Cow.