Posted by Michael A. Kamperman on January 29, 2011
It is time for the feederal government to step up and assume all funding and responsibility for Medicaid. The federal government spent approximately $290 billion on Medicaid in 2010. The states spent roughly $130 billion on Medicaid in 2010. This included stimulus aid to the states whereby the federal government picked up an extra $50 billion in Medicaid expenditures on behalf of the states. That aid, along with other stimulus aid to the states, ends July 1, 2011. That is when America will hit its real auterity moment if change we can believe in doesn’t come. Most states, and all the large ones, simply cannot afford the ever growing costs of Medicaid in an era of depressed tax revenue and high unemployment. Most states have already made deep cuts to education, which the President emphasizes should be a priority. They will make much deeper cuts to education after July 1 when the stimulus dollars runout. Traditionally liberal states with Democratic Governors like California and New York intend to make cuts to their respective Medicaid programs. The best way to assist the states fiscal burden is for the federal government to end the Medicaid mandate and assume full responsibility for the program.
While this will increase the federal budget and the federal deficit, it will decrease state budgets and state deficits. The states must balance their budgets, whereby the federal government can operate with deficits, even large ones. The states cannot print money and the federal government can. Federalizing Medicaid will not create a new program, it will not create net new federal/state combined government spending, therefore it will not create an extra burden on the taxpayers who pay both federal and state taxes in one form or another. What it will do is end the political trick of claiming fiscal prudence while pushing the mandates for spending and taxes down the food chain to the states, who in turn push it down to the local level.
Despite the rhetoric and the acquisence of the weak minded who are legion amongst us, the fact is the federal government does not have a spending problem. It has an economy in a depression problem. Costs for aid to the needy and the unemployed haved soared, while tax revenues from paychecks have plummeted. Full employment would cut the current federal budget deficit by more than 3/4. Less money out and more money in. From there prudent fiscal management could easily allow economic growth to balance the budget by 2020. One way to ease the pressures of the depression is to remove almost certain draconian austerity cuts coming from state budgets starting July 1. How many kids in grade school can we cram into a classroom before seriously eroding their education and our country’s future? Texas plans to cut $5 billion per year in education funding. That amounts to around $1,000 per kid per year in a state that averages $7,000 per kid in overall education spending. Texas budget hawks looked seriously at withdrawing from Medicaid, but fortunatley reason and wisdom prevailed. Its not rocket science to figure out cutting $3 billion a year in health spending for the poor out of the state budget doesn’t offset foregoing the benefit of $17 billion a year in federal health spending for the poor in Texas. The President needs to step up to the plate and lead us on a path different from the path President Hoover led the nation on during the last depression. Despite current punditry I see him sharing Hoover’s fate at both the polls and in the history books if he doesn’t come forward with an agenda focused on creating good paying jobs with benefits for the middle class. Federalizing Medicaid won’t create new jobs, but it will help stop the bleeding, especially in the classroom.
Posted by Michael A. Kamperman on November 23, 2010
Shockingly, the State of Texas is placing pulling out of Medicaid as agenda item number one in its attemtps to close a projected $25 billion two year budget shortfall. At first this seemed like just a back-bencher idea. But Governor Rick Perry has endorsed pulling out of Medicaid as a legitimate way to help close the budget gap. Medicaid will spend $24.7 billion in Texas in fiscal year 2011. The federal government will cover $16.6 billion and the state will cover the rest. Governor Perry claims they can save both the state and the federal government money and do more with much, much less funding. This is nothing short of libertarian ideology gone wild. First and foremost it is impossible to do more with that much less. Second, because Hospital Emergancy Rooms cannot refuse service based on the ability to pay a significant cost will be shifted to hospital budgets. County hospitals will require increased local tax support. Third, over one million Texans work in healthcare. The states unemployment rate will rise substantially and its tax revenues will decrease if this plan is enacted. However, the state will have to make dramatic cuts in public K-12 education if it is unable to find cuts in Medicaid. The math simply doesn’t allow Texas to balance its budget, leave Medicaid off the table, leave tax increases off the table, and leave K-12 education off the table. While libertarian ideology is making Medicaid a wedge issue in Texas, it is a budget wedge issue in almost all of the states. The states are broke and significant cuts are coming.
The simple solution is to federalise Medicaid. The federal government should absorb all of the costs of administering the program. Since the federal government doesn’t have to have a balanced budget it can continue the program even during severe economic downturns like the one we currently find ourselves in. The poor will continue to receive quality healthcare. The only growth area of the economy, healthcare, will not be thrown into an instant depression as would happen if multiple states opt out of Medicaid to balance bleeding budgets. And children in first grade will not be crammed into larger and larger classrooms where learning takes a back seat to baby sitting. Importantly, federalising Medicaid doesn’t increase overall government spending or taxation. It simply shifts the states existing burden to the federal government which mandated Medicaid.
All of this is the unintended consequence of a poorly constructed Health Care Plan rushed through on a party-line vote by the Whitehouse. The President should step forward and show leadership. The Health Care plan has to be fixed. But the political Rubics Cube of satisfying the left, the right, and the middle on this issue may be beyond the political skills of the best ploiticians, no less the current Hooveresque Whitehouse. Still the President should place this issue on the table. He should think big, not small.
Posted by Michael A. Kamperman on February 12, 2010
The time has passed to think in terms of temporary and targeted stimulus bills to create jobs. While gimmicks like cash for clunkers or the first time home buyers tax credit create a temporary boost in demand, they are simply too small to employ the 8.4 million Americans who have lost their jobs since the recession started. This doesn’t even count the additional 3 million Americans who have graduated from High School and College and entered the labor force. The country is down over 10 million jobs. To create jobs we need to start thinking big, not small. Employers in for-profit, not for-profit, and in government need a sense of permanency to be able make plans to expand. Aid that is here today and gone tomorrow will not encourage serious job creation efforts that involve spending money on buildings and new equipment. No one knows when the temporary stimulus will end. No one knows what the rules will be a year or two from now. Planning requires confidence, and confidence requires a sense of permanency. The New York Times pointed out that 15% of the nations workforce work for state and local governments, which includes schools. Another 15% are employed in the healthcare sector. In one fell swoop the federal government could stabilize one third of the workforce by taking over all Medicaid funding from the states and raising the bar on the quality of medical care provided to participants in most states.
According to the New York Times “Without more aid, states will have to cut spending and raise taxes to close an estimated $142 billion budget gap for fiscal year 2011, which starts on July 1 for most states. Last year’s gap was $125 billion. Next year’s is anticipated to be $118 billion.” The state budget gaps will not magically end in 2011. In fact, the more the states cut the worse the economy becomes. States are set to spend over $150 billion for Medicaid in 2010. By having the federal government assume all Medicaid spending the states would be able to divert those funds to close budget gaps, cut taxes, and fund local economic stimulus programs. The federal government could lower the eligibility requirements for Medicaid providing medical care and insurance to more low income Americans. While they are at it, Congress could pass a bill allowing anyone with a pre-existing condition who is denied insurance an option to buy in to Medicare. And, they could pass a law with criminal penalties for any health insurance company that attempts to skip out on paying from someone they collected health insurance premiums on. Every state would benefit.
The federal government can run budget deficits and most states are required to balance their budgets. The federal government can print money and the states cannot. The states are simply not able to provide economic stability in a depression as severe as the one we are in. State governments are being dragged down with the rest of us. The federal government can fulfill this function. The absurdity of the situation is Washington is not thinking big, it is thinking small, smaller, and smallest. The House wanted a $154 billion jobs bill, the Senate negotiated an $85 billion bipartisan jobs bill, but for some reason (re-election) majority leader Reid decided a $15 billion jobs bill that is targeted and paid for with tax and spending savings elsewhere is the right way to go. This is no way to instill confidence in employers to run out and hire more workers. We cannot cut our way to prosperity. We cannot cut our way to a balanced federal budget. Medicaid is an existing program and the state workers in the program can be transferred to the federal government. All that would happen is the Medicaid partner with the deep pockets that can handle the liability would handle it.
