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Counting the cost of Kansas' Medicaid expansion

3/18/2014

There's no such thing as "free money," right? Those who support Obamacare's expansion of Medicaid in Kansas think there is. According to them, expanding the low income health care program will give Kansans the coverage they need at no cost to our state.

There's no such thing as "free money," right? Those who support Obamacare's expansion of Medicaid in Kansas think there is. According to them, expanding the low income health care program will give Kansans the coverage they need at no cost to our state.

It's the best of both worlds--and it's too good to be true. If Kansas expands Medicaid under Obamacare, we'll actually find that what we were promised can't possibly be delivered, and both Medicaid recipients and the middle class will pay the price.

Any discussion of Medicaid should begin with its track record on patient health. On that score, Medicaid is an abject failure.

Medicaid recipients consistently fare poorly on medical access and outcomes. Their access to doctors and specialists is significantly lower than those with private insurance. Their death rate in hospitals following surgery is twice as high. And children on Medicaid have much longer waits to see doctors, along with a higher chance of being turned away by health care providers.

Medicaid's moral failings should be enough to end the expansion debate once and for all. But just in case, Medicaid expansion is also an expensive endeavor that will force the state to cut funding from other important areas of the state budget.

Using an analysis model pioneered by other states, I estimate that Medicaid expansion will cost Kansas taxpayers between $822 million and $1.39 billion over the next decade. This will be even after the federal government's promise to pay all of expansion's costs for next three years, and then 90 percent of the cost after that.

This is the fine print of the "free federal money" claim. Legislators should take it with a grain of salt whenever they hear we are passing up free money, or at least question its source. Kansas hospitals are expansion's most vocal supporters; they also benefit financially from the policy.

Their claim that the federal money is free also ignores that the White House has backed off of its promise to foot the bill. Previous presidential budgets included cuts to the federal government's payment rates to below 90 percent, a dramatic change that the White House has euphemistically called a "blended rate."

Rhetoric aside, this will leave Kansas taxpayers on the hook for hundreds of millions of extra dollars each year.

Even the left-wing Center on Budget and Policy Priorities now predicts that a change in federal funding levels will "prompt states to cut payments to health care providers and to scale back the health services that Medicaid covers for low-income children, parents, people with disabilities, and/or senior citizens." In retrospect, this seems inevitable in an era of trillion-dollar deficits and ever-growing federal debt.

In other words, Kansas' share of the bill could be much higher than $1.39 billion. That leaves our state legislature with two choices: slash Medicaid payments and restrict its services, or throw more money at Medicaid to cover the shortfall.

That money will have to come from somewhere. Regardless of whether Washington holds up its end of the bargain, the state legislature will have to make hard choices about what it can afford to fund. The two biggest losers will likely be the programs that middle class families value most: Our transportation budget and our education budget. Education, which comprises over 43 percent of the state budget, could be a first victim.

That leaves Obamacare's Medicaid expansion with no leg to stand on, either financial or moral. It will harm the Kansans it's supposed to help, add billions of dollars to the state's budget, and force the state to cut valuable programs that serve our children.

If that's what "free money" costs, then Kansas should pass.

Steve Anderson served as Kansas' budget director from 2010 to 2013. He is currently the senior adjunct fiscal policy fellow at the Kansas Policy Institute, and has served on a board of directors in the hospital industry.

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