Promises Made and Unpaid

November 11, 2018

by Steve Stofka

A tip of the hat to veterans on this holiday.

The Kaiser Family Foundation (KFF) regularly updates their map of the states that have not expanded Medicaid under Obamacare (Note #1). Here’s a screen shot.

KaiserMap
All the non-expansion states except for Wyoming had per capital personal incomes below the national average.

PerCapPersIncByState

Since these states have less per capita income, it is likely that more of the residents in those states qualify for Medicaid. During the initial phase of Obamacare, the Federal government picked up the tab for the additional costs. That share will gradually decrease to 90% in 2020, when the states will have to foot 10% of the expansion costs.

A ten percent share seems light. Why don’t these states expand their Medicaid eligibility? Let’s look beyond accusations of prejudice, which exists in every state.

The populations in most of these states are older. Poor seniors living in nursing homes qualify for traditional Medicaid, which costs each state much more than expansion Medicaid. The national average of state costs is 38%; the Federal government picks up an average of 62% of traditional Medicaid spending. Wyoming pays almost 50%, far above the average. Texas and South Dakota pay 44% and 41%. Oklahoma and Florida pay the average of 38% and the rest of the non-expansion states pay below average (Note #2).

The financial crisis ten years ago crippled state finances for several years and some have still not recovered. Since 2000, average per capita real income in the U.S. has grown only 1.2% per year. Medicaid spending has grown at more than three times that rate (Note #3). Residents in these poorer states have fared worse than the average. Revenues in those state have barely kept up with obligations. Officials in poorer states with older populations anticipate that funding difficulties will continue now that the first of the Boomer generation has turned 70. Given the political pressure to expand, how much longer will some of these states resist expansion?

Thirteen states that have expanded coverage have adopted new revenue sources to fund the additional costs (Note #4). Most states fund their Medicaid spending, original and expansion, out of general revenues which are falling behind state promises. These include infrastructure repairs – roads, bridges, improvements and repairs to schools and other government buildings – as well as pension obligations. Officials of state and local governments made these promises decades ago, when per capita incomes were growing more than 2%. Annualized growth over a twenty-year period has not been above 2% since 2001.

PerCapIncReal

Tax the rich is one solution offered, but that is a short-term solution. In the long-term, higher income growth is the sustainable solution. Until Democratic politicians can craft a coherent policy message that promises to promote stronger economic growth in these states, the voters will reject them.

/////////////////////

Notes:
1. KFF’s map of states that have turned down Medicaid expansion.
2. KFF’s breakdown of Medicaid costs per state.
3. A summary of inflation adjusted Medicaid spending from 2000-2012 showed a 4.1% annual growth rate – pg. 4. A state by state breakdown is on page 35. A 49 page report from Pew Charitable Trust.
4. A recent article showing the various sources of funding that expansion states are using.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s