Saturday, June 11, 2016

Medicaid Expansion: When Numbers Collide with Narrative

Please click on pic to get a larger view

State Senator Bryan King is passing around an interesting chart which he asked the Arkansas Bureau of Legislative Research to prepare. Please click on the image to get a larger view. Proponents of the state's Medicaid Expansion under Obamacare, whatever they are calling it these days, keep directing our attention to the spending line items that have been lowered by the program.  They then demand that the critics of the program tell them where they would get the money to replace these "missing" savings from the state budget if we end it. This chart shows that there would be no missing savings from the state budget. Line items that have been reduced are off-set by line items that have been increased in order to implement and administer the program.

Total Medicaid related spending, using both federal and state money, shows explosive growth. In 2013 this spending was about $4.6 billion dollars. This year, three years later, around $7.2 billion dollars of taxpayer money will be spent in this category. That is an increase in excess of 50%! They disguised this growth by taking spending that was in one program and divided it between the old and the new program. Yes it looks like spending on the old program went down, because a lot of that spending has moved over to the new one. Total spending is way up.

Once you zoom out past the shell games and sleight of hand, all of this program does on net is pass out a whole lot of federal money, much of it borrowed, to a sliver of our own population. That is a good deal for them but a bad deal for everyone else- especially the next generation who are also expected to pay for this.

Notice on the top half of the chart that total state funds spent (for Medicaid related spending) does not go down from 2012, when we had not expanded Medicaid, to the present year. Instead, total spending trends up. We are not spending less state money because we expanded Medicaid. We are spending more. Spending for "Traditional Medicaid" went down but total state spending for Medicaid related stuff went up. The drop in traditional Medicaid came from starting a second Medicaid program called "the Private Option" or "Arkansas Works" and shunting a lot of people from the old to the new program. The feds were paying for 100% of the premium costs for the second program during the first three years.  In theory that was supposed to save state government money, at the expense of the federal budget.

The theory did not work out in practice as you can see from the chart. Sure state dollars spent on one line item went down, and a new federal budget line showed up with many more dollars being spent. But other state budget lines increased even while the "traditional Medicaid" number went down. The reason is simple. Even if the feds were paying 100% of the cost of benefits for the first three years of the new program, there are a lot of other expenses involved with administering a new program. Adding 250,000 people to the government rolls costs serious money beyond the cost of benefits paid. Administering the program is costly, even if FEDGOV is paying the non-administrative costs.

This year is the "high-water mark" for the program in terms of benefits to the state budget. Starting next year, Arkansas is going to have to shoulder 5% of the cost of paying benefits while retaining the burden of administering the program. That is why the chart shows the total state spending for Medicaid related stuff will be $120,000,000 higher in 2017 than it is this year. And its only going to get worse through 2021 because our share increases each year.

The bottom line is, not only did the state's ruling class have to commit welfare fraud on a massive scale in order to make the numbers look as good as they did, the fact is that the total numbers don't look good. Proponents have to play a shell game with the accounting in order to make it seem like the program is saving the state money. When you factor in all costs, it is a bad deal for the state as a whole and it is getting worse. 

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