Health Care

Medicaid expansion means higher taxes

March 21, 2019

Kaitlyn Finley

Many states that expanded Medicaid under Obamacare may face budget shortfalls due to higher-than-expected costs and scheduled cuts in federal matching contributions. Beginning next year, expansion states will be responsible for 10 percent of costs from their Medicaid expansion enrollees.

According to a recent Washington Post article, expansion states are raising taxes to fund medical welfare benefits for their new entitlement class of able-bodied, working-age adults.

California, Louisiana, Arizona, Colorado, Indiana and Minnesota have … implemented higher taxes either on health providers or insurers, or on the sale of alcohol or cigarettes, according to a tally by Governing Magazine. North Dakota cut payment rates to Medicaid providers. Several states, including Kentucky and Arkansas, have pursued charging premiums and implementing work requirements to make up shortfalls.

The Washington Post also notes New Hampshire Gov. Chris Sununu recently signed legislation to raise taxes on liquor sales to fund Medicaid expansion in the Granite State. According to, the liquor tax funds formerly went to the state’s Alcohol and Drug Abuse Prevention and Treatment Fund.

Although these states’ plans to tax hospitals to pay for expansion may seem like an additional financial drain on emergency care providers, in reality, many “nonprofit” hospitals have jumped at the chance to take on this financial “burden” because hospitals may increase their profits thanks to the tax. State hospital associations in Kansas, Louisiana, and Tennessee have previously supported proposals for provider taxes to expand Medicaid. A 2016 report from Brian Blase with the Mercatus Center even noted that “…hospital and nursing home associations … worked with states on the [initial] design of provider taxes.”

In recent years, politicians on both sides of the aisle have criticized these taxes because they have shown to be a shell game that boosts hospitals’ bottom line and allows states to draw down more Medicaid funding from the federal government. Ultimately, the only group of people who don’t benefit from these schemes is taxpayers.

Depending on questionable funding arrangements and unstable sin taxes to fund a permanent entitlement program is a risky fiscal policy for states. Oklahoma should pay attention to other states’ costly experiments with Medicaid expansion and reject this bad deal.

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