Tuesday, July 3, 2012

Funny Money and Government Math ... Extending Medicaid to States


Individuals pay taxes to several different governments to fund K-12 government schools. For example, (1) local property taxes support the K-12 local schools, (2) state income taxes also support the local schools and other schools throughout the state, and (3) federal income taxes support the local schools, other schools throughout the state and then schools throughout the rest of the nation, too.

On average local K-12 schools receive close to 50% of their funding from local property taxes and 50% from the state and federal government, with the vast majority of that government funding coming from the state.

As another example, Medicaid is pretty much a 50/50 program between individual states and the federal government. Thus, a portion of our taxes paid to the state and federal government, respectively, go to pay state and federal Medicaid costs in a manner similar to that described for K-12 schools hereinabove.

Now the Affordable Care Act is "encouraging" each state to expand its Medicaid program to cover approximately another 30 million enrollees in total. The national government will pay for 100% of a state's cost initially and then 90% of the total after a few years. States must now decide whether or not to expand the state's Medicaid program, receive the additional federal subsidy and cover the additional people.

However, our individual taxes will be the same, whatever each state elects to do. As federal taxpayers, some of our taxes will be used to pay the 100% initially and then the 90% after a few years, to whichever states join the program. States will pay more for Medicaid, albeit with supplemental federal assistance for those opting to extend coverage to more people and with no extra funds going to those states opting out of the additional coverage.

Where the "Extra" Money Originates

Isn't it interesting and a bit troublesome, however, that the "extra" federal subsidy, whether at 100%, 90% or whatever, must come originally from money borrowed from the Chinese, since the national government has no money of its own and is running at a more than one trillion dollar deficit already before any additional costs of ObamaCare are factored into the equation?

And isn't it also interesting that lots of state funds which are in turn passed down to local schools come from that same out-of-money national government borrowing from the Chinese?

So states get money from the national government for both schools and Medicaid now, and our national government has to borrow the money in the first place, since taxes aren't high enough to cover its expenditures. Confused yet? If so, I think that's the politicians' plan. Mission accomplished on their part.

Still, states have to decide what to do about accepting more funny money or forfeiting same to other states and declining to take it themselves.  I guess that means we will pay the Chinese for the other states' funny money, so we may as well take it ourselves. How crazy is that?!

The bottom line is that we spend $1 trillion more than we take in now, and we'll spend more with the Medicaid expansion program, along with the rest of the ObamaCare program. The hole deepens, and it's all happening right in plain sight, too.

What Will States Do?

Some States Balk at Medicaid Expansion has this to say about the potential Medicaid expansion program in ObamaCare for individual states:

"Opposition to expanding Medicaid under the health-care overhaul is hardening in some Republican-led states, as Gov. Rick Scott of Florida said over the weekend that he will opt out. His decision puts the former hospital executive at odds with state hospitals.
Another half dozen Republican-led states—Iowa, Louisiana, Mississippi, South Carolina, Texas and Wisconsin—say they, too, may opt out of widening eligibility for the federal-state insurance program for the poor starting in 2014.

Florida led the 26-state challenge against the health-care law. The states argued that its Medicaid expansion was coercive, since it required them to greatly expand their programs or lose their existing federal Medicaid funding. The Supreme Court's health-care decision last week gave states the new option of sitting out the expansion without sacrificing their existing federal Medicaid funding.

The health-care law, which is designed to extend insurance coverage to more than 30 million people, depends heavily on Medicaid's expansion. It also sets up the state-by-state exchanges, where another batch of lower earners and others can shop for insurance and apply for tax credits toward the cost of premiums.

Mr. Scott's decision means as many as 1.38 million Florida residents will end up not getting Medicaid under the 2014 federal expansion, according to calculations of census data by the nonpartisan Kaiser Commission on Medicaid and the Uninsured. Although some residents may qualify for subsidized insurance under the health overhaul, many are expected to remain uninsured.

"Since Florida is [now] legally allowed to opt out, that's the right decision for our citizens," Mr. Scott said in a statement Sunday. He also said Florida won't create its own health-insurance exchange, opening the door for the federal government to create one for it.

Under the law, the U.S. government will cover 100% of the cost for states to expand their Medicaid programs, scaling that back to 90% by 2020. Mr. Scott has said he doesn't believe the state can afford its 10% contribution.

Florida hospitals have said they will push back against Mr. Scott, a onetime chief executive of Columbia/HCA Healthcare Corp. They say they need the Medicaid expansion to bring insurance to more people to help curb the cost of emergency-room care for uninsured people, which they are required to provide in some cases by federal law, as well as the costs of bad debt and charity care. They are in a particular bind because the health-care law also includes cutbacks in federal payments.

By the Numbers

  • Number of Floridians expected to be in Medicaid in 2019 without expansion: 2.74 million
  • Number of additional Floridians expected to be in Medicaid in 2019, with expansion: 951,622 to 1.38 million
  • Estimated cost to state of expansion, 2014-2019: $1.2 - $2.5 billion
  • Estimated cost to federal government of expansion in Florida, 2014-2019: $20.1 to $24.3 billion
Sources: Kaiser Commission on Medicaid and the Uninsured

"Florida will lose billions and billions of dollars…that would in essence be subsidizing other states that choose to implement Obamacare," said Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, a hospital group serving large populations of low-income and uninsured patients.

Some industry leaders said they thought that Mr. Scott's background in hospitals meant he would grasp their concerns. "Our governor understands acute-care delivery and financing," said Bruce Rueben, president of the Florida Hospital Association. "He probably understands the consequences for hospitals" if they continue to have to provide care for people who lack coverage while sustaining cuts to public programs. . . .

Mr. Scott could be opposed by the state legislature, which is dominated by Republicans but has had its differences with the governor. Some Republicans are wary of his stance on the issue."


There are no good options. Cities are struggling financially, states are struggling financially, the federal government is struggling financially, individual households are struggling financially and K-12 public schools are struggling financially as well.

Meanwhile, struggling hospitals, insurers, doctors, pharmaceutical companies and others are expecting to receive additional funds from government due to ObamaCare's expanded Medicaid coverage of millions of additional people.

Still, we can't create more real money by waving a magic wand.

The more we spend for health care, the less we'll have to spend on other things.

And the more we spend for K-12 education, the less we'll have to spend on other things as well.

On the other side of the ledger, the more we pay in property taxes, state income taxes and federal income taxes, the less we'll have to spend elsewhere, too.

A dollar is only 100 cents, however many different ways we split it and however many different places we decide to spend it.

And phony government budgeting projections, policies, laws and regulations can't change that simple fact one single bit.

Thanks. Bob.

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