Thursday, December 20, 2012

The Politics of Fiscal Delusion and Obamacare

The hot-button issue in the Arkansas Legislature is whether or not the state wants to participate in Obamacare.     There are two main parts here.......

Perhaps the most expensive item in the whole plan is expanding Medicaid so that families whose household income is up to 130% of the poverty level can participate.  This is different from the issue of whether we set up an exchange, co-operate one with the feds, or do nothing in which case the feds have threatened to set one up for us without our input.   The exchanges under Obamacare provide subsidies for insurance for those over 130% of the poverty level.   Medicaid would cover all those under 130% of poverty level under the Obama plan, but states must decide (separate from the decision to open an Exchange) if they will expand Medicaid.

Medicaid in this state currently covers those adults whose incomes are less than 18% of the poverty level (but already covers children at higher levels).  To cover those adults all the way up to 130% of poverty level would require massive amounts of spending.   To encourage states to increase Medicaid coverage, we have the promise of the Obama administration that they will pay for 100% of the coverage for the first two years and 90% thereafter.

There is one last twist to the above, and it shows how clever the left really is.   The feds have always paid some portion of Medicaid, let's say around 70%.   When Obama was first elected he championed a stimulus bill.   A major component of that stimulus bill was that the feds increased Medicaid payments, say to around 85% of the total.    That stimulus has now come to an end.   This means that just as states were used to getting 85% of their Medicaid tab picked up by the feds, the percentage drops to around 70%- unless a state capitulates and raises coverage, in which case we have the fed's promise they will pay for it all for two years and 90% thereafter.

I admire their cunning, their diabolical foresight, and the amount of integration it took to put the states in this position.   Because of the looming cuts in Medicaid, Arkansas will need to come up with almost $150 million extra dollars just to keep coverage where it is now- unless they agree to trust Washington and massively increase who is covered.  The left is thinking years ahead.  They are constantly plotting and setting things up.  If the right does not start empowering people able to think at that level and stay five moves ahead on the chess board of public policy they will simply continue to lose.

Some Arkansans are screaming for us to take this "free money."  Problem: There is no money.  Only the promise of money from the most indebted institution in human history- the federal government of the United States.   They cannot keep their past promises, much less this current one.  They can only finish destroying the dollar and the economy trying.

If the dollar is destroyed, Washington loses its means to keep these promises and people who sign up and become dependent on this new plan are worse off than before.   If Washington reneges on its promise to pay 90% of the bills for eternity then our state can't afford it and again those who became dependent on the system are worse off.   We should say "no" to this "free money" from our bankrupt and delusional federal government just as a fish should say "no" to "free food" on the end of a hook.    Washington does not have the means to keep its promise.   This is going to be a "bait and switch" where states will wind up paying for more and more of this program.   If we can't afford that, and we can't, then we should just say "no."

It really does not matter whether you like the idea of expanding Medicaid or hate it.  It does not matter whether you want to help the poor or want to eat the poor.   The fiscal reality is, neither the state nor the nation have the money to pay for it, promises to the contrary not-withstanding.   A person who says "we can't afford this" is not a heartless person, they are a realistic person.   They are a grown-up in a landscape of perpetual adolescents who think prices are evil and only exist to keep people from getting things.

Participating in the insurance exchanges is a separate issue.  I predict even the GOP will sell out on this one and opt to at least a partnership with the feds in an exchange.    I have heard Republicans like Speaker Davy Carter say that the feds will just run over us if we don't.  So what?  That just means that they will build their own exchange.  Why not let the feds own it?  Because then none of the Arkansas lawmakers will have any input on which insurance firms get the gravy associated with any government redistribution of wealth.   There are powerful insurance interests in Arkansas that want in on the government gravy.

I fear the decision on whether to cooperate with the feds in setting up an exchange will not be decided on what will be good for the general public, but rather what will benefit existing insurers in the state.   I believe Obamacare will fall apart and be a complete mess in a decade or so, if that long.    Do we want to own any of that mess?   If some of our firms are in on it then they will have a vested interest in keeping the system going long after it is clear that it is a failure.   See ethanol subsidies that won't die.  

So the two main state issues with Obamacare are separate, but they have one thing in common.  Do we really want to partner with the federal government?  Do we trust what they are telling us?  Do we want more people in this state to be vested with their interests?   I'd say no.  I think most grassroots activists would.  But  our "representatives" may not represent us on this one.


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