Losing the States
Republicans are losing the battle against big government in state capitals now, too.

Ohio governor John Kasich


Avik Roy

It has become a common refrain among conservatives who are looking to cheer one another up. “We may have lost the White House,” they say, “but we’re doing great work in the states.” Republicans have total control of state government (the executive and the entire legislature) in 24 states, after all, compared with 12 states for the Democrats. But a number of these allegedly conservative governors and legislatures are actively supporting the biggest enlargement of state government in decades: Obamacare’s expansion of Medicaid.

Medicaid, one of the pillars of the Great Society, provides government-sponsored health insurance to low-income Americans. A key aspect of the program is that it’s jointly funded by the states and the federal government: Washington provides “matching funds” to support state Medicaid spending. On average, prior to Obamacare, for every dollar a state spent on Medicaid, the federal government chipped in another $1.32. It has been a politician’s dream: Raise taxes on your constituents by $1, and spend more than $2 on them in return.

Obamacare significantly expands the Medicaid program by requiring states to cover all individuals below 133 percent of the federal poverty line. (Previously, Medicaid was mostly aimed at children, the mothers of children, the elderly, and the disabled.) States that refused to go along with the expansion would have their matching funds yanked.

Officials of 27 states sued the federal government, arguing that this feature of the law was coercive. When the Supreme Court upheld the bulk of Obamacare last summer, the justices agreed with the states, and threw out this particular provision. As a result, states now have the option of accepting or rejecting the Obamacare expansion of Medicaid, while still leaving their existing Medicaid programs intact. Surprisingly, however, six GOP governors — those of Arizona, Michigan, Nevada, New Mexico, North Dakota, and Ohio — have endorsed the Medicaid expansion.

The Medicaid Gang of Six all describe themselves as conservatives. Indeed, five of the six state governments had been party to the litigation against the Medicaid expansion. But when it came time to actually say no to Obamacare’s new torrent of Medicaid spending, they opened the spigot instead.

“For a state match of a little over $154 million in FY 2015,” cheered Arizona’s Jan Brewer, “the State can draw into its healthcare sector $1.6 billion in federal funds — a return on investment of more than 10 to 1” (I’ll let you, dear reader, consider the “return on investment” gained by borrowing trillions of dollars from China.)

Ohio’s John Kasich, former chairman of the House Budget Committee, revealed the Six’s reasoning when he wrote that endorsing the Medicaid expansion “avoids leaving Ohioans’ federal tax dollars on the table and keeps the federal government from simply giving them away to other states.” In other words, it’s important to fleece the taxpayers of other states, because some of them will be doing it to us, too.

But expanding Medicaid is bad policy. The system has the worst health outcomes of any insurance program in the developed world, largely because it severely underpays doctors and hospitals, making it hard for Medicaid patients to find a physician who will see them. Somewhere between 10 and 30 percent of Medicaid spending goes to fraudsters. And some of the fraudsters are state governments — the federal government recently found that New York’s Medicaid program has overcharged federal taxpayers by $15 billion over the last 20 years.

One group agitating especially loudly for the Medicaid expansion is the hospital industry. It is the most government-subsidized industry in America, and it has never said no to the offer of more taxpayer dollars. But hospitals should be careful what they wish for. In Ohio, hospitals lose more money caring for Medicaid patients than they do caring for the uninsured, a problem that Obamacare will make worse.

And while Washington is promising to fund most of Obamacare’s Medicaid expansion over the next eight years, it is almost certain that Congress will contribute less to the program over time, sticking states with the tab. Indeed, President Obama proposed to do just that in his budget for fiscal year 2013.

It’s worth noting that 13 Republican governors have said no to the Medicaid expansion: those of Alabama, Georgia, Idaho, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, and Wisconsin. But another eleven GOP governors — those of Alaska, Florida, Indiana, Iowa, Kansas, Nebraska, New Jersey, Tennessee, Utah, Virginia, and Wyoming — are undecided.

Further, the Republican governors who have said no, such as Louisiana’s Bobby Jindal, have been far from outspoken in criticizing governors who waste the dollars of taxpayers in other states on Medicaid in their own states. These executives who say no need to do more to stand up for the economic interests of their states’ residents.

Fortunately for taxpayers, governors don’t have the final word on Medicaid expansion. It’s state legislatures that would have to approve the budgets that would fund the Medicaid expansion, and tea-party activists have been successful at challenging state-level Republican politicians who stray to the left. These voters, once awakened, can help determine their states’ answer to the Medicaid question. But they must awaken soon.

— Avik Roy is a columnist for NRO and a senior fellow at the Manhattan Institute. You can follow him on Twitter at @aviksaroy.