There are many good reasons to support full federalization of funding for Medicaid. The most obvious is that it eliminates the Mississippi problem where Legacy Medicaid is skimpy as hell, and Expansion is not part of the conversation. Federalization would dramatically improve the quality of life and health for hundreds of thousands of people in Mississippi and millions across the country. This would be good in and of itself.
Almost as importantly, Medicaid demand is generally cyclical with the general economy. Demand increases as the economy gets worse as people lose their jobs, lose their previous employer sponsored coverage and disability rolls increased. At the same time, the states which pick up twenty-eight to fifty percent of the bill on average, see a massive revenue drop as their tax revenues tend to be extremely pro-cyclical as well. A bad economy will see a state have a big budget hole that by law in forty nine states, it can’t paper over with deficit spending and a massive increase in eligible population for Legacy Medicaid. Usually the response by the state is to cut Medicaid reimbursement, reduce what Medicaid will cover and reduce the number of people covered. This is not a good thing from a minimizing human suffering perspective and it is not a good thing from the stabilization of macro-economic conditions perspectives. The states make things worse when they cut back. That is the story that Calculated Risk has been telling for years.
For the states that have elected to not be run by sociopathic assholes and thus expanded Medicaid, the expansion portion of the Medicaid budget goes from being a pro-cyclical to either neutral to slightly counter-cyclical. When bad times hit and more people lose their jobs, see their hours cut back, or see their wages reduced so that they drop under 138% FPL, the federal government is picking up 100% of the initial tab and then at least 90% of the future tab. This means the state would be receiving a big infusion of federal money in bad times, which acts as a counter-cyclical stimulus. It is balanced out in good times when the Medicaid Expansion eligibility pool shrinks because wages are rising in the state. It is not a pure long term counter-cyclical play as the states still have some temptation to reduce Medicaid expansion as they are on the hook for 10% of the costs and the incentives don’t change for cutting the Legacy Medicaid population (although I would suspect an amazing number of people claiming exactly 100% FPL plus a dollar as their income on their applications) but Medicaid expansion paid for by the federal government now acts as an automatic stabilizer.
Charles Gaba does some yeoman’s work on figuring out what the current Federal committment to funding Medicaid expansion and produces a nice first cut at the stabilizer at risk:
That’s nearly $19 billionper year which would be required across those 27 states to cover the roughly 7 million people who only have Medicaid/CHIP coverage thanks to the ACA….
the states will still eventually be on the hook for 10% of these costs even with Obamacare in place…. What you can’t argue, with a straight face, is that you’d be able to keep the expansion in place without either a massive state tax hike or a massive state budget cut elsewhere.
That number for the current expansion states is probably a bit high as there were a number of Blue States that had expanded Medicaid to at least 138% of FPL for some populations pre-PPACA and had paid for that expansion with significant state funds. They shifted those individuals that were state funded to the federally funded Medicaid Expansion pool to save state money. I would assume that Massachusetts for instance would re-offer Medicaid eligibility with state dollars to people who lost Federal Expansion Medicaid if the Republicans repealed PPACA in its entirity.
But fifteen billion dollars a year in neutral economic conditions for slightly more than half the country’s population with up to twenty or thirty billion dollars a year in federal cash flows in down conditions is a significant automatic stabilizer. Repealing PPACA and its Medicaid expansion is abhorrant from a moral point of view as well as counter-productive from a general economic stewardship point of view. Automatic stabilization is a good thing as we saw most of ARRA’s net stiumulative effect (excluding the AMT patch etc) be cancelled by states slashing their budgets.
Even more effective stabilization could be achieved if the federal government took on either full funding of all Medicaid, shifting the costs from the states’ books to the federal budget where there is fortunately no balance budget constraint which enables counter-cyclical demand management policies or dramatically increasing the funding share of legacy Medicaid if full federal funding is not politically feasible.
MomSense
I think Republicans want to compartmentalize discussion of Medicaid without relating it to the numbers of people who work for minimum wage at large corporations like Walmart. These employees earn poverty level wages which guarantee that they qualify for Medicaid, food assistance, etc.
If Republicans were really so concerned about the burden on states to fund Medicaid expansion, it would make sense to require employees to pay a higher minimum wage that would allow current Medicaid recipients to either purchase insurance through the exchanges or receive their health benefits as part of their compensation package.
I would love to know the percentage of Medicaid recipients working for Walmart, McDonalds, etc. I think about 10 years ago or so MN looked at their Medicaid recipients and determined that Walmart employees were the largest group.
ETA: I’m all for federal funding of Medicaid but I don’t think we should ignore the freeloading companies who expect taxpayers to subsidize their businesses to such a degree.
JPL
@MomSense: GA did the same study and once again, Walmart won the contest. GA didn’t expand Medicaid and we are number one in unemployment.
cmorenc
The democrats missed the chance to federalize medicaid when they passed the ACA, in part because they badly underestimated what cruelly sociopathic assholes GOP-controlled states and five members of SCOTUS would be in reaction to the ACA – upheld only because Roberts voted to hold the act constitutional but holding the states over the barrel on accepting ACA medicaid funding unconstitutional.
Snarki, child of Loki
Great analysis, and it would lead to improved policies, were the US not in thrall to barking mad ideologues.
Richard Mayhew
@cmorenc: Agreed, that was probably the best time.. Actually retrospectively looking at it, that was probably the 2nd best time. The best time would have been in the ARRA and extending the Medicaid match rate bump for a far longer period of time to give additional relief to state budgets. Dramatically restructruring Medicaid on the fly in ARRA may have worked.
rikyrah
thanks for the post.
the ACTUAL posterchild, in terms of DOLLARS SPENT on MEDICIAD is a WHITE SENIOR CITIZEN getting NURSING HOME CARE.
THAT is who gets the largest % of Medicaid Dollars.
MomSense
@cmorenc:
I think that it was federalized in at least two of the iterations of the bill but the problem was that some of the conservaDems needed some “states know best” cover and that plus the assist from SCOTUS is how we ended up where we are.
NCSteve
Ah yes. I remember the days when you could explain why doing a thing would be good policy and have a reasonable expectation that the idea might take hold and eventually be enacted into legislation.
Remember back when Gore wrote “The Assault on Reason” and was met by a universal wave of sneering, jeering, raspberries and invective from the MSMers who deigned to acknowledge it? Yeah, that was the point at which you could definitively state that the country had squeezed its collective fat ass into a giant handbasket and was shooting down a well-greased slide to perdition.
The Moar You Know
Consistently the best work here, Richard. Albeit sometimes the most depressing. Thanks for this.
Bill D.
Economists call this behavior countercyclical, because it means that the item in question goes up when the economic cycle goes down and vice verse. Aside from the implications for state budgets that you mention, placing automatic countercyclical features into federal government spending will tend to stabilize the economy as opposed to making economic cycles worse. Once upon a time this was actually an intended result, before such programs were viewed as being mainly a give-away to “looters”.
jonas
@Bill D.: There’s a important corollary to this, however, that really goes back to the dawn of the New Deal itself: White people receiving benefits = good, hardworking Americans who hit a rough patch getting well-deserved aid from the government until they get back on their feet. Black people receiving benefits = looters/moochers. Blacks were never considered to be “real” Americans, hence their participation in social welfare programs is literally taking food from the mouths of the deserving poor, i.e. white people.
satby
@jonas:
I have heard this said, almost word for word, from the white folks on aid around here. They deserve it because they were
hard workerswhite.NonyNony
@MomSense:
I get what you’re saying, but I actually want the opposite approach. I want the government to be handling more of the basic healthcare costs through our tax dollars for everyone, not fewer. I would love to see a Medicaid for all system that covers basically everything that the PPACA mandates that a minimum health care plan should cover. Supplemental coverage available on the market for people who want Gold and Silver plans and have the money to buy them, but a basic level of coverage for everyone.
Basically every business should be getting the subsidy that WalMart gets as a baseline for all employees, not just the lowest paid ones. From the huge to the self-employed it should just be covered.
MomSense
@NonyNony:
I would definitely support government handling more of our healthcare costs from tax revenues but again we would still have to deal with corporations paying their fair share of taxes. I’m also not sure how you deal with the difficulty of trying to switch to more government handling of basic health care. In other countries that have made similar transitions it takes a loooong time and many other countries have created sort of hybrid insurance/government healthcare. Switzerland has an excellent system of highly regulated insurance companies that is more like the ACA model than England’s NHS model.
Jim Filyaw
I feel for the downtrodden of Mississippi and other places like Texas, but I’d be a helluva lot more sympathetic if these ill-used peasants got off their collective asses and did something about it. As I recall, the poor in the backwaters far outnumber the gentry. They’ve still got the franchise (for the moment, anyway), they should use it. “Every bondsman bears in his hand the power to cancel his captivity” Shakespeare. I’m getting damned tired of forcing betterment on these yahoos.