The Right Prescription

No More Gun to the Head

There's no reason the states should participate in the president's Bernie Madoff-type scheme.

By 7.13.12

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First came the threat. Then the bribe, or the offer that sounds almost too good to be true. Now it is the moment of truth.

On June 28, U.S. Supreme Court Chief Justice John Roberts rendered the majority opinion in a 5-4 vote upholding the constitutionality of the Affordable Care Act. However, with a 7-2 margin, the Court struck down a key part of the law that would have stopped the flow of all federal funds for Medicaid to states that did not expand access to this program, as the law intended. Since the federal government puts up the bulk of the money in this joint federal/state program, states that chose to opt out of the expansion would have faced a massive and essentially mandatory increase in their Medicaid costs if this part of the law had been upheld in its original form.

"The financial 'inducement' Congress has chosen is much more than 'relatively mild encouragement' to expand Medicaid," Roberts wrote. "It is a gun to the head."

Unable to coerce state governments to spend more of their tax money on Medicaid, the federal government offers a grace period of several years in which it will pick up essentially all of the cost of the Medicaid expansion, scheduled to begin in 2014, if individual states commit to spending money of their own in years to follow.

Over a 10-year period, Missouri -- my home state -- would need to commit to spending about $430 million in order to qualify for $8.4 billion in additional Medicaid grants from the federal government. If that looks and sounds almost too good to be true, it is because it literally is too good to be true.

Where is the money supposed to come from to pay for a huge increase in this entitlement program, which is intended to add some 17 million people nationwide to the Medicaid rolls? Do we just pretend that the money is there when we know very well that it is not?

Many state governments, including Missouri, are already over-leveraged. They cannot commit to spend large additional sums of money on Medicaid without slashing spending in other areas, such as education.

Meanwhile, the federal government -- with a string of trillion-dollar deficits -- is now borrowing about 40 cents for every dollar it spends. Imagine adding $400 of credit card debt for every $1,000 you spend. How long do you think that would work?

In short, the states are being asked to participate in a Bernie Madoff kind of scheme. They are being asked to commit to spend large sums of money, which they don't have, in order to receive money from the federal government, which it doesn't have, while making an unsustainable set of promises to people at both the state and federal levels.

Nebraska Gov. Dave Heineman and Iowa Gov. Terry Branstad are already on record opposing the Medicaid expansion. Let us hope that Missouri and other states join them in opting out of this part of the federal health care plan.

It is easy to write IOUs. As Bernie Madoff did, you can -- for a while anyway -- write new IOUs to replace old IOUs. But it is morally as well as fiscally reprehensible to make promises that you cannot keep. That is why the states should say "No" to the Medicaid expansion plan.

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About the Author
Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, a free-market think tank based in St. Louis, Missouri.