Obamacare, Politics and the Myth of Free Money

By Kevin Holtsberry

A growing chorus, pushed by liberal interest groups, think tanks and a sympathetic media, is castigating governors who are reluctant to expand Medicaid and implement state level exchanges in the wake of the recent Supreme Court ruling. These critics present themselves as seeking only the good of citizens while accusing the governors of playing politics.

This is disingenuous at best. First, pretending that supporters of the Affordable Care Act (aka Obamacare) are not engaged in politics requires a level of naïveté larger than the national deficit. You might recall how the bill was rammed through Congress using every parliamentarian trick available and remains widely unpopular.

You might also recall the immense pressure applied to the Supreme Court in the run up to its decision. Any attempt to overturn the act was portrayed as judicial usurpation and a threat to the American system. And in the aftermath of the decision, the left insisted that the court had spoken and that now the country must fall in line. All of this activity aimed at passing and implementing the most ambitious piece of legislation in my lifetime was certainly not beanbag.

And more importantly, this accusation of “politics” ignores the fundamental fact that public policy in a participatory democracy always involves politics. The components of the act are not somehow exempt from political debate and discussion simply because of a court ruling. And given the stakes, and the forthcoming presidential election, it is only natural that elected officials across the country are being cautious.

Second, the underlying argument assumes that federal spending is somehow “free” money and that the offer of expansion is simply to good to pass up.

In a rather rich case of projection, Innovation Ohio accuses Governor Kasich of playing politics while Ohio loses millions. The ideologically sympathetic Toledo Blade follows a similar line, accusing Kasich of politics on the issue rather than taking the generous federal money and immediately implementing Obamacare in Ohio.

The irony is that this mindset is what has gotten us to where we are today. It is a belief that federal dollars are free and Ohioans should grab every penny lest they be scooped up by other states. The history of Medicaid is one of states getting hooked on federal dollars only to have the program gobble up their budgets even as it offers less and less flexibility and reduced quality of care.

But state taxpayers are federal taxpayers. These dollars don’t magically appear in Washington to be doled out to states, the money comes from individuals in those very same states. Ohioans are rightly concerned about the federal deficit and about paying higher taxes. Increased spending in Washington impacts Ohioans to pretend otherwise is to ignore fiscal reality.

The Blade casually tosses aside the fears of increased Medicaid enrollment through a woodworking effect as if the dollar amounts are not significant. But those numbers are big enough to give governors across the country, both Republican and Democrat, pause. And whose numbers should we trust, state experts or liberal think tanks who support Obamacare?

These governors understand that Medicaid is a deeply flawed system that hooks states on a process of expanded enrollment with the promise of federal funds. Once on this path any attempt to reign in spending or control costs means giving up not only the state’s share of spending but the feds as well.

And is it really realistic to assume the federal government will never attempt to roll back the amount it covers? Half the assumed savings of Obamacare comes from reducing Medicaid reimbursement rates. Facing a deficit beyond what many of us can conceptualize, will Washington continue to pay out vast sums to states already committed to expanded coverage for their citizens?

In reality, what underlies this debate is a mix of politics, policy disagreements and deep uncertainty about the future. Governors understand that what is good for Washington is not always (rarely?) good for the states. They understand that Medicaid is a failed program that has devastated state budgets, increasingly involves reduced flexibility, and carries with it perverse incentives.

Caution in this case is not mere politics but good common sense.

Kevin Holtsberry is President of the Buckeye Institute for Public Policy Solutions.

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