Ilovebenefits’s Blog

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States to Drop Medicaid?

The Heritage Foundation has published a short paper by Dennis Smith and Ed Haislmaier suggesting that cash strapped states might drop Medicaid entirely rather that having to endure new spending requirements and loss of control over their own programs. The authors write, “The health care legislation currently in Congress not only imposes new costs on states through expansion of the Medicaid program; it also preempts state authority in management of the program. Faced with becoming merely an agent of the federal government, states will likely take the rational and reasoned approach of simply ending the state-federal partnership known as Medicaid.”
They estimate the states could save more than $1 trillion over a ten-year period by doing so.
This seems like a pretty shocking thought, but consider that almost every state is currently slashing spending on education, law enforcement, infrastructure maintenance, prisons, and virtually every other state function. Meanwhile, the federal government may provide extremely generous subsidies to low-income people who are not on Medicaid, as much as $20,000 for a family of four. But for a family on Medicaid, the state pays almost half of the costs of its coverage. So it is not unreasonable for a state to think about how much money it could save by dropping its program and letting those people sign up for the new 100% federal subsidy. Doing so would enable almost every state to avoid all those other cuts, balance its budget, and still pay for the long-term care portion of Medicaid.
Welcome to the Land of Unintended Consequences.


December 3, 2009 - Posted by | Federal Government, healthcare | , , ,

1 Comment »

  1. […] report on the I Love Benefits Blog speculates that some states may merely drop Medicaid and push people into more generous federally […]

    Pingback by Will states drop Medicaid if they are forced to spend more? « quinnscommentary | December 3, 2009 | Reply

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