State governors are practically begging the federal government for permission to cut hundreds of thousands from their Medicaid rolls. Why? Thanks to the recession, declining revenues, and the rising price of health care, state governments are increasingly unable to bear the burden of Medicaid costs. The Wall Street Journal explains:
About eight million Americans joined the Medicaid rolls between 2007 and 2010, many because they lost jobs. The federal government picks up 57% of states' Medicaid tab, on average. But in July, $26 billion in additional federal Medicaid funding will expire, leaving states to plug a big budget hole.
Here is a nifty graph to illustrate the problem:
In hindsight, the stimulus package should have contained a federal guarantee to fully carry state Medicaid costs for a few years; through the recession -- which officially ended in 2009 -- and into 2010, to further stabilize state budgets. Indeed, to step outside the realm of the possible for a moment, it would have been best if the stimulus contained a bill to permanently federalize Medicaid. In addition to keeping states solvent through the recession, it would have guaranteed health care for millions of low-income Americans, since the federal government doesn’t need to balance its budget, and recipients wouldn’t be at risk for sudden changes in Medicaid eligibility. Health-care reform will do some of the work here -- by greatly expanding eligibility for Medicaid -- but it will keep the basics of the status quo in place: Medicaid will remain a federal/state partnership, when it really should be a straightforward federal program, administered by the federal government.
All of this is to say -- for the millionth time -- that rising health-care costs are the chief problem for the United States’ long-term fiscal health. Literally everything else is secondary to arresting the growth in health-care spending, which promises to bankrupt everyone if left unaddressed.
