Curtis Shelton | May 14, 2019
There is no pot of ‘free’ Medicaid money waiting to be spent
Medicaid is a jointly funded program, meaning the federal and state governments are both responsible for financing the program. Currently the federal government pays for 62 percent of all Medicaid costs on average across the 50 states. Under the Affordable Care Act, states have the option to expand Medicaid program eligibility to able-bodied, working-age adults and receive an enhanced reimbursement rate. Starting in 2014, the federal government covered all the costs for all new expansion enrollees through 2016. That full match reimbursement rate has fallen over the last few years and is scheduled to sit at 90 percent in 2020 and beyond.
Medicaid expansion proponents use this 90 percent match as justification for the attempt to grab “free” federal money by expanding Medicaid. These proponents say Oklahoma is foolish not to expand Medicaid, as it won’t be state taxpayers who will pay for it but rather the federal government. That logic is flawed. Aside from the fact the federal government does not create its own revenue (it relies on taxpayers for that), there is no dedicated fund with unused money waiting to be spent. Medicaid funding is open-ended; any additional spending by the states means the federal government automatically spends more and must raise the additional revenue to do so.
If Oklahoma were to expand Medicaid it would have the option of raising taxes to pay for it. But the federal government has another option. Unlike most state governments, the federal government is allowed to operate with a deficit. The federal government has run a deficit for nearly two decades. The projected annual deficit for fiscal year 2019 is $896 billion, which is 78 percent of the country’s annual GDP. The total national debt is projected to climb to $16.6 trillion in fiscal year 2019. Over the next 10 years the federal government projects to borrow an additional $12.7 trillion with a projected annual deficit of $1.3 trillion, 92 percent of GDP, by 2029. This would raise the total national debt to $28.5 trillion.
Expanding Medicaid will result in more government dependence and will further increase the burden already placed on the next generation. According to the Oklahoma Health Care Authority, 628,000 able-bodied, working-age adults could be eligible for Medicaid if Oklahoma expanded. That means the federal government would have to add $3.4 billion to its already oversized budget. As Washington politicians’ actions have shown, the short term takes precedent over the long term no matter how severe the consequences. This is not the attitude of most Oklahomans. Time and again voters have elected fiscal officials committed to reversing the trend of “spend now, pay later” that is pervasive in the nation’s capital. Medicaid expansion is the wrong choice for those seeking to help the most vulnerable of our citizens—including our children, who will really be the ones paying for it.
Policy Research Fellow
Curtis Shelton currently serves as a policy research fellow for OCPA with a focus on fiscal policy. Curtis graduated Oklahoma State University in 2016 with a Bachelors of Arts in Finance. Previously, he served as a summer intern at OCPA and spent time as a staff accountant for Sutherland Global Services.