There has been a bit of a kerfuffle lately about selected governors looking to drop their Medicaid programs. The Wall Street Journal reported on Monday that the governors of Washington, Texas, South Carolina, Wyoming, and Nevada have all considered the idea to one degree or another.
The liberal reaction to this, from Ezra Klein and others, has been to deride the governors in question, wondering why any governor would want to drop Medicaid. Now, nobody wants to see Medicaid harmed, and having states pull out of the program would be an undesirable result, but it is important to recognize that the Obama administration has put states in this situation.
First, the new health-care law has put extra pressure on the system by adding 16 million more people to the 62 million already on the Medicaid rolls — half of the newly covered people in the Obama plan will be covered via Medicaid. Second, as the WSJ piece notes, the federal government covers about 57 percent of Medicaid costs, but they do so at a price — federal mandates such as the refusal to allow states to lower eligibility levels. This means that the federal government gets to decide who is eligible for Medicaid, which is supposedly state-run, rather than governors and state legislatures.
Third, the federal government will increase funding to states in the short run to handle the new Medicaid enrollees, but savvy governors recognize that these short-term funding hikes could go away because of federal budget pressures, leaving states holding the bag. The best way to protect Medicaid is to give governors more flexibility, but without that flexibility, the governors in question are exploring their options, which seems to be a sensible thing to do.