Cox: State, feds can’t afford Medicaid expansion

January 16, 2013

As you might have heard, Gov. Jay Nixon recently endorsed a plan to greatly expand Medicaid eligibility in our state. Medicaid is the health care benefit designed to help our poorest citizens.

The Obama administration is currently encouraging states to add large numbers of people to this welfare program as part of the Affordable Care Act. Under Nixon’s proposal, 300,000 additional Missourians would become eligible. The additional individuals added to this program include only healthy adults under 65 years of age who earn up to 138 percent of the “poverty level,” which is currently $31,809 annually for a family of four. Nixon’s proposal does not affect eligibility for children, pregnant women, the elderly or disabled individuals.

Under this proposal, by 2020 Missouri would accept up to $17.8 billion in federal funds at the cost of $1.6 billion to our state budget. Nationwide, the total cost of the Medicaid expansion will be $1 trillion over 10 years, with the federal government picking up 93 percent of that tab. The federal government is promising to pay most of the cost in the earlier years and by 2020, Missouri will have to pay for 10 percent of the new Medicaid costs. Before Missouri goes down this path, we need to carefully consider the proposal.

First of all, I disagree that there is “free money” from the federal government. With the current federal debt at $16 trillion and projected to rise to $23 trillion in four years, we as citizens must consider the implications to future generations of spending additional federal money to expand welfare. The money that comes from the federal government is either tax money or additional debt to all of us — not “free money.”

Missouri’s current annual budget is $23 billion with little room for reductions. With the projected average yearly cost to our state of $160 million, we must first decide where Missouri’s share is coming from. Nixon has suggested certain unspecified savings as the source. With most of the cost back-loaded, we are in effect spending money and hoping that future governors and General Assemblies can find these savings. This appears to be a plan that will necessitate tax increases in the future. This is akin to the federal government’s behavior in always kicking the can down the road when it comes to fiscal policy. We cannot consider any plan that cannot be paid from existing revenue.

The analysis relied on by the governor has serious problems. These include:

• Their analysis understates the estimated number of new participants, according to the federal government’s own Center for Medicare and Medicaid Services, which skews the costs.

• They assume no employers will drop coverage for their employees who then might be eligible for Medicaid.

• They conclude that the nursing home industry will see the largest job growth despite the expansion being applicable to 19- to 64 year olds, not many of whom require nursing home utilization.

• Administrative costs are projected to add almost $500 million in new government costs over the seven-year study timeframe.

• They assume not one of the 23 percent of individuals who would become eligible for Medicaid but currently have private insurance would drop their coverage and opt to have “free” coverage.

My concerns about this proposal include the fact that growth in the economy is not projected to outpace the demand on existing entitlements, let alone new ones. Education funding is second only to entitlement program expenditures, making it the likely target of liberal lawmakers and interest groups. Nixon has yet to suggest where to find savings. I can’t resist pointing out that most of the state’s share of costs doesn’t set in until after he’s looking for a new job.

Another concern I have is whether we can trust the federal government to live up to the promise that our current president is making to pay an additional $1 trillion to expand Medicaid over the next 10 years. I am not sure that we as a nation will have this money to spend. It appears to me that our federal government is making promises that it cannot fulfill.