The Federal Government Needs to Fund 100% of Medicaid

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.