Medicaid Expansion with Default Promise

One of the biggest problems with tax-paid, government-provided entitlements is that government makes promises without a credible source of funding. The universal approach to entitlements is that legislators identify a problem, assume government is the best vehicle for a solution, then craft a bill, pass it into law and go home to their voters and tell of their hard work and what they have accomplished.

Rarely, if ever, do the same legislators talk about the possibility that they may have over-promised something. Yet over-promising happens more often than most people realize, and you don't have to go to Europe to see governments struggle to keep promises or even go into systemic promise default. All you have to do is look at Social Security. The program was created almost 80 years ago and went into effect with a tax rate of two percent. In 1950 Congress raised the Social Security tax for the first time. After 40 years, in 1990, they had increased the tax a total of 20 times - one increase per newly elected Congress - and raised the tax rate from two to 12 percent.

Today, working Americans have to pay much more out of their paycheck for the same kind of retirement benefits.

Medicare is another example. The cuts that were made to that program as the Affordable Care Act went into effect also illustrate how government can change the circumstances of an entitlement promise - and change it for the worse.

It is rare, however, that our government tells us beforehand that it may very well nibble away at a promise, or default on it. The normal routine is to tell voters that the promise embedded in a new or expanded entitlement program is iron clad, rock-solid reliable. But when it comes to Medicaid Expansion, the Wyoming state government has flagged up even before the program is passed into law.

From the Casper Star Tribune on December 12:

The federal government has said it would initially cover the entire cost of the expansion, with federal support gradually dropping to 90 percent. If the government fails to fulfill its promise, the Legislature could decide to do away with the expansion, Health Department Director Tom Forslund said. Even if the state starts the optional expansion and then shuts it down, the working poor adults who were covered by the program will have better health as a result, Forslund said.

What Director Forslund recommended state lawmakers to do was, plain and simple, to default on a promise that - according to Director Forslund's own department - would give tax-paid health insurance to 17,600 Wyomingites. First government should invite these people to join the program, and then, if the funding model that the state was relying on falls apart, then government should simply throw them back out in the cold again.

Director Forslund's suggestion raises two very important questions. First: does the department know something about the federal government's future appropriations plans that we mere mortals are unaware of?

This question is not rhetorical. It is genuine. Neither Congress nor President Obama did anything to prevent the decline in physician reimbursement rates in Medicaid that went into effect on January 1. Even though that was, technically, an end to a temporary increase, the federal government let the higher rates expire in an effort to continue to improve the federal budget. In fact, the Office of Management and Budget has been quick to adjust the projected budget deficit based on states' limited interest in Medicaid Expansion.

In other words, fiscal concerns, driven by federal over-spending - over-promising - have already dissuaded some Medicaid spending. It is not beyond the realm of the imaginable that those with more intimate knowledge of the future of Medicaid are aware that the federal government in the neat future is likely going to cut its share of Medicaid and, consequently, Medicaid Expansion. This would explain the director's default suggestion.

The second question has to do with the people who would enroll in Medicaid Expansion. The very reason why the Wyoming Department of Health wants Medicaid Expansion is that they do not believe that there is any other way for the prospective enrollees to get health insurance. That is not the case - if given a fighting chance, private insurance providers can give everyone who needs insurance an opportunity to buy it - but even if it were true: what would it do to the credibility of the Wyoming state government if first it lures 17-18,000 people into an entitlement program only to shut down the program at some random point in time?

What if the federal government cut its share of transportation funding? Would our state lawmakers then terminate all highway maintenance? What if Congress cut or ended funding for school lunches? Would our kids have to starve their way through school? (According to my middle-school daughter they practically do already, thanks to federal nutrition dictates, but that's another story...)

These questions seem absurd today, but imagine the day when the state announces the end to the Medicaid Expansion it fought so hard to create. Imagine what it would look like when the Wyoming Department of Health throws all those thousands of people back out into the cold, uninsurable reality that the state say they live in today.

That day, in the regular taxpayer's eyes the idea of a general government default on federally sponsored programs will no longer be absurd. It will be a matter of time.