Medical Cost Exposure Forcing States' Hands

By James R. Edwards, Jr. on January 1, 2011

Obamacare is already forcing states to make hard decisions in order to stay out of bankruptcy. Health "reform" cheerleader Norman Ornstein decries in the Washington Post how states are approaching the federally mandated health costs they will see skyrocket over the next several years. However, with massive loopholes cynically intended to allow illegal aliens to get taxpayer-funded health care, states have little choice but to start curbing their overall health spending now. And, of course, many legal immigrants will soon qualify for Medicaid, worsening the burden.

The Medicaid program has long been a major cost driver on state budgets. The "Great Recession" has stretched states already. Fewer people working means less in tax revenues. It also means greater demand for state help, including through Medicaid. This program, which entitles those with low incomes to taxpayer-funded health care, already eats up 22 percent of state budgets. Program costs are rising from the bad economy and medical inflation. It will soon see the price tag spike because Obamacare expands eligibility for this entitlement program.

In 2014, Medicaid will cover those persons earning up to 133 percent of the official poverty level. With an extra 23 million people potentially seeking this entitlement, states will have little choice but to pick up their medical bills – or else take stark measures that affect every recipient of this welfare program. The federal government will pick up most of the extra costs for the first two years, but then each state will face an increasing share of the costs of Medicaid expansion. Thus, the federal health law puts states on the hook for higher and higher spending for a program that already consumes more than a fifth of the entire state budget.

Though the 112th Congress appears less inclined to enact an amnesty, some portion of the estimated 3.1 million illegal aliens in the broader Medicaid income-qualifying range will benefit from the law's loopholes. The health law, which was the Senate version of health reform, makes childless adults eligible for Medicaid. It also requires that Medicaid applicants' eligibility be presumed. The law does not even state that illegal aliens are ineligible for Medicaid, nor does it require verification through the SAVE system or the to-be-established, inferior verification system for state health "exchanges." (SAVE is used to screen Medicaid applicants, but it is unclear whether states must or may employ this taxpayer safeguard for newly eligible beneficiaries, given the explicit "presumptive eligibility" language.) And legal immigrants with income of one-third above the official poverty level or less will certainly use this welfare option.

Despite the Ornsteins of the world, Obamacare is playing out with real-world ramifications. The federal government can run a trillion-dollar budget deficit. States, however, cannot. Cost-cutting decisions are being made. And health programs necessarily have a target on their backs. Reducing legal immigration levels substantially, stepping up "attrition through enforcement" to drive down the illegal alien population, and reviving "public charge" doctrine to hold immigrant sponsors accountable for the public costs imposed by those they brought into the country would help relieve the coming health costs of health "reform."