by James A. Bacon
Do you trust the federal government to make good on its promises to uphold entitlement spending? Or do you fear that, as the federal funding crisis intensifies, the feds will renege? That is the question at the heart of the debate over Medicaid expansion in Virginia.
Bart Hinkle, a columnist for the Times-Dispatch, invites readers to consider the fate of the American Indians who put their faith in federal promises. Years ago the Bureau of Indian Affairs and the Indian Health Service contracted to provide medical services to reservations across the country, only to break their commitment. Health care services have been disrupted as a result. The tribes sued for breach of contract, the U.S. Supreme Court backed them up a year ago and, yet, the Obama administration has yet to redress the breach. It appears there is not enough money to go around. Hinkle extrapolates to the Medicaid debate:
Current estimates say the federal government’s share of the tab for Medicaid expansion from 2014 through 2022 will come to $931 billion. If the cost is lowballed to even a small degree, then the feds will see more than $1 trillion in new expenses over the next decade.
By contrast, the federal government owes Indian tribes a comparatively paltry $2 billion or so. And that obligation is not merely statutory, but contractual. Yet even after Supreme Court intervention, Washington refuses to cough up the dough. …
If the federal government can ignore its contractual obligations, its own statutes and its own Supreme Court, then it certainly can ignore its own funding formulas, too. This doesn’t necessarily clinch the case against Medicaid expansion; it’s just one point among many. But it does suggest those hawking the promise of free federal money epitomize Samuel Johnson’s definition of second marriages: “the triumph of hope over experience.”
One day, historians will look back upon this time and be amazed and appalled that Americans decided to expand Medicaid entitlements while ignoring the eroding foundations of Medicare and Social Security.
The Disability Insurance (DI) trust fund within the Social Security program will run out of money in 2016 — two years from now! — meaning either that benefits for millions of disabled Americans will be cut by 20% or that money will have to be taken from some other source, most likely from the Old Age Survivors Insurance (OASI) fund.
OASI is scheduled to run out in 2035. If Congress resorts to the craven and cowardly expedient of kicking the can down the road by tapping OASI to prop up disability payments, then both programs will run out of money by 2033.
Meanwhile, Medicare’s Hospital Insurance (HI) reserve is scheduled to run dry by 2026. That represents an improvement from last year when the Social Security and Medicare trustees projected that it would run out in 2024 based on the conviction that cost-control measures embedded in the Affordable Care Act would stretch the Medicare trust fund a bit further. You can choose to believe that logic if you wish, even though Medicare’s own chief actuary took the extraordinary step of publicly disagreeing. But even under the more optimistic premise, a Medicare financing crisis is only twelve years away.
So, imagine it’s a decade from now: 2024. The Medicare trust fund is either evaporating or two years from doing so, portending a massive financing crisis for America’s second-largest entitlement program. Panic! The impending Social Security funding crisis is now only nine years away, too close to ignore. Blind panic! Another $6.3 trillion in budget deficits (CBO forecast) has brought the national debt to more than $23 trillion. Interest payments on the debt now amount to $900 billion a year, meaning that a huge chunk of the federal government’s cost structure is not subject to budget cutting. Outright hysteria!
Against that backdrop, federal Medicaid expenditures will have soared from $298 billion in FY 2014 to about $580 billion in FY 2024. Can anyone assert with a straight face that a future Congress might not try to spread the pain by insisting that the states pay a greater share for the expanded Medicaid program? It would take a blind faith in the goodness of the federal government to deny such a possibility. I have no such faith. Expanding Virginia’s Medicaid program will make the Commonwealth vulnerable to a bait-and-switch a decade from now. Restructuring Virginia’s health care system around a bigger Medicaid program invites the same fate as the Indian reservations. No thanks.