Tuesday, January 17, 2012

Obamacare Hits the States (Again)

The website Stateline last week published an analysis of the major issues facing states in 2012, and not surprisingly Medicaid was high on that list.  While the recession hit states hard, Obamacare’s onerous new mandates have combined with the continued economic slowdown to inflict a devastating one-two punch on state budgets:

Two years ago, Medicaid eclipsed K-12 education as the most expensive item in state budgets.  Since then, it has only kept growing.  Medicaid now comprises 24 percent of state budgets, when federal funds are counted.  That’s up from 22 percent last year, according to the National Association of State Budget Officers.  The upward spiral seems to be continuing.  Even as states get ready to write their budgets for fiscal year 2013, which starts in July in most states, half of them expect to be wrestling with Medicaid shortfalls in their 2012 budgets, according to a survey by the Kaiser Family Foundation.

Making the job for fiscal 2013 even more difficult for states are new federal restrictions and an increasing number of court rulings that limit states’ options for trimming their programs….Other restrictions on states come from [Obamacare], which prevents states from doing anything that would lower enrollment.  In addition, a new federal rule proposed late last year would require states to produce data showing that cuts to hospital and doctor fees won’t make it harder for Medicaid patients to get the care they need….[Under Obamacare,] states are barred from doing anything that would lower Medicaid enrollment below the income levels called for in the national health law’s 2014 Medicaid expansion.  That includes raising premiums and co-pays to levels the federal government considers unaffordable for low-income patients.  That leaves states with relatively few options when it comes to controlling Medicaid costs.  They can reduce provider fees and eliminate optional benefits.

As the article demonstrates, Medicaid is a large – and growing – share of state budgets, and has increasingly begun to crowd out other potential priorities like education, corrections, transportation, etc.  Yet Obamacare only makes this budgetary mess worse, imposing new unfunded mandates of at least $118 billion.  Thus, even as the states (slowly) start to recover from the budgetary effects of the recession, the budgetary effects of Obamacare will have consequences for years – even decades – to come.