by James C. Sherlock

Featured image courtesy of Cato Institute.  It is worth a close look by those who suggest there is no room for federal budget reductions.

On the morning of Feb. 25th, I posted a column a week ago that asked whether Virginia should pay the full cost of Medicaid expansion.

That same evening, the budget outline for FY 2026 passed by the House of Representatives on Feb. 25 will need major savings from federal contributions to healthcare. The resolution’s sponsors intend to:

“Achieve $8.7 trillion of savings over 10 years by strengthening Medicare for
seniors, making Medicaid work for the most vulnerable, ending cradle-to-
grave dependence, and lowering interest costs.”

To the charge that the budget resolution will kick poor people off of Medicaid, the sponsors have offered a peremptory response:

Our budget does not include policies that reduce benefits or remove Medicaid enrollees from the program. Rather, the budget refocuses Medicaid on the most vulnerable and empowers states with flexibility so they can tailor their Medicaid programs to their populations.

So that clearly portends state funding of Medicaid expansion. 

I quote below the Social Security Act provision on Medicaid appropriations.

“Sec. 1901. [42 U.S.C. 1396] For the purpose of enabling each State, as far as practicable under the conditions in such State, to furnish

(1) medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services, (emphasis added) and

(2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care, there is hereby authorized to be appropriated for each fiscal year a sum sufficient to carry out the purposes of this title.

The sums made available under this section shall be used for making payments to States which have submitted, and had approved by the Secretary, State plans for medical assistance.”

It is difficult to square appropriations for Medicaid expansion with that statute.

As pointed out in my previous article, Medicaid expansion alone, unreformed, will cost the federal government $1.7 trillion over the next ten years. Not for basic Medicaid for poor children and adults, but rather for its expansion to cover single, healthy adults earning up to 138% above the poverty level.

We note that ten states have never participated in the expansion. Yet their citizens help pay its federal costs.

In view of both the federal debt and the statutory definition of the purposes of federal Medicaid appropriations quoted above, I recommend Virginians pay with state funds whatever portion of Medicaid expansion we wish to keep. States already police Medicaid. Thus motivated, Virginia will move quickly to eliminate fraud.

The left complained about ceasing the federal contributions, even though the states could, at will, maintain and even expand Medicaid further.

One comment from my previous column inspired this one.

“Feds can run a deficit and should run a deficit at a healthy level compared to GDP. Virginia can not so the cost of healthcare in this case must be extracted directly out of the economy. That is not fiscally responsible.”

So many questions were raised by that statement it is hard to know how to limit them. But I’ll try.

First, we note that the national debt is nearly $37 trillion and the interest on that debt is already higher than the defense budget.

Then, another useful fact:

Government spending in the United States was last recorded at 34.4 percent of GDP in 2023 . Government Spending to GDP in the United States averaged 25.68 percent of GDP from 1900 until 2023, reaching an all time high of 47.01 percent of GDP in 2020 and a record low of 6.55 percent of GDP in 1907.  

So, the questions.

• What level of federal borrowing is considered “a healthy level compared to GDP” as posed by the reader?
• What reserves of global appetite for American debt will we tap to fund a war? Recovery from another plague? From a financial panic? And at what interest rates?
• What would the transition to universal government healthcare favored by the left look like?  
• Who exactly would run the health system in all of its complexity and component parts? A government bureaucracy? Most do not know that the Center for Medicare and Medicaid Services, sets payment rules for each year, but effectively has no budget. It pays what it is billed without limits.
• How much of the healthcare system would be nationalized? Just the payers? The hospitals? Nursing homes? Home health? Individual practitioners?
• How would the limited supply of healthcare be rationed and by whom?

It is time for Virginians to consider their answers to those questions.