Medicaid is a shared state and federal program that provides health care coverage to individuals with low incomes and certain disabilities. Under Obamacare, states have the option to add additional beneficiaries to their Medicaid program, with the federal government covering an increased share of the costs for these new recipients. While this may seem like a good idea at first glance, I believe going through with this expansion would ultimately be a mistake for South Carolina.
First, South Carolina simply can’t afford to expand its Medicaid program. Medicaid is the by far the fastest growing part of the state budget, reaching $1.88 billion this year. Over the last five years state funding for Medicaid has increased by $527 million while state funding for K-12 education has increased by $53 million. The Obamacare Medicaid expansion would add over half a million new people to the Medicaid rolls in South Carolina – and up to $2 billion in additional costs – by 2020.
Some argue that our state just can’t afford to pass up this deal because the feds are going to initially cover 100 percent of the expansion costs. But the truth is that the amount funded by the feds phases down to only 90 percent after the fifth year. While 10 percent doesn’t sound like a lot for the state to cover, it actually represents nearly $450 million annually.
Supporters of the expansion have suggested that the state can later return to the current program if the expansion costs are too high later, but that’s just not practical. In addition to being politically unrealistic, it would be callously unfair to entice someone to become dependent on a program only to yank it away later. The more likely result will be either cuts to other core government services (such as education, public safety and infrastructure) or more tax increases.
Second, the Obamacare Medicaid expansion is a bad deal for South Carolina. While I have a fundamental philosophical difference with Obamacare, there is a decent business case for some states to expand their Medicaid program. By implementing this Medicaid expansion, collectively the states of Maryland, Massachusetts, New York and Vermont will actually decrease the amount that they have to pay for Medicaid by $23 billion. But each state presents a different set of circumstances.
Texas, for example, would see its Medicaid costs increase by $27 billion over the next decade. Unfortunately, South Carolina is more like Texas and will see its costs increase. In fact, only four other states are projected to experience a higher growth rate in state funding for Medicaid than South Carolina would by implementing the Obamacare expansion.
Finally, states don’t need the federal government taking more control of their Medicaid programs through the enticement of more funding. Instead the feds should be granting states more flexibility in managing their programs – allowing states to innovate and find ways to improve health outcomes and reduce costs.
One only needs to look to the state of Rhode Island – rarely considered a conservative state – for an example of how states can reduce costs and improve services when granted the flexibility to innovate. In 2009, Rhode Island was granted flexibility in the form of a global Medicaid waiver. Simply put, this means the state was given a lump sum of money, freed of the many bureaucratic requirements the feds impose on states, and allowed to deliver the same services as it saw fit. The result is over $100 million in savings over the first three years and a substantial bend in the cost curve – with five-year estimated spending dropping to $9.5 billion from $12.5 billion. All states should be given this flexibility to innovate.
South Carolina has a constitutional requirement to balance its budget every year. When we decide to expand a program we must carefully consider the long-term budget consequences along with the present costs. The federal government does not and continues to borrow ever more money from countries like China to not only continue funding for unsustainable programs, but also even expand spending for programs that are already out of control.
While the “free” money the feds are offering for a few years to expand our state’s Medicaid program might be tempting, South Carolina must be mindful of the fiscal disaster that it would create in the future and tell the Obama administration, “Thanks, but no thanks.”