Numbers for Medicaid expansion don’t add up

Obamacare supporters want to talk numbers when it comes to expanding Medicaid in Georgia. OK, let’s talk numbers:

When they returned last month, Georgia’s legislators already faced a $774 million hole for Medicaid through June 2014. That was before any expansion, and even after assuming renewal of the “bed tax” that brings in some $700 million a year for the program.

Medicaid is already the fastest-growing part of Georgia’s budget. Including PeachCare for kids, it will consume $1 of every $7 in state funds in fiscal 2014, up from $1 per $9 a decade ago.

That increased ratio means almost $616 million will go to Medicaid next year instead of transportation, tax cuts, whatever. State lawmakers can do precious little to arrest the trend.

Still, Obamacare supporters want Medicaid to grow faster.

Pressure is mounting on Nathan Deal to follow the path taken by some other Republican governors — Florida’s Rick Scott and New Jersey’s Chris Christie joined the list in the past eight days — and accept the expansion included in Obamacare.

At first, they note, Washington will pick up the tab. Only after three years will the feds begin reducing their share of the expansion, to 90 percent by 2020. How long that rate sticks, I note, will depend on the generosity — or profligacy — of future Congresses.

But today I want to address two other arguments the expansionists are pushing.

Scott made one argument last week when he announced support for expanding in Florida: “[O]ur options are either having Floridians pay to fund this program in other states while denying health care to our citizens,” he said, or taking federal money to expand Medicaid.

The same claim is made here. We’re going to pay for it, so why not benefit from it?

The arrangement might make sense if it were Washington whose budget was balanced and the state whose finances were in shambles, not the other way around.

The notion taxpayers are already funding the Medicaid expansion requires one to ignore the serially large deficits Washington is running — as well as lawmakers’ reluctance to accept the relatively small cuts of sequestration, due to hit Friday.

Spending that rises while huge deficits persist is not “paid for” in any meaningful sense. Scott, Christie and the others are wrong about the responsible course.

And persist deficits will. Just this month, the Congressional Budget Office projected only two years out of the next 11 in which the deficit will be smaller than the very largest deficit (adjusted for inflation) between 1940 and 2008. That’s probably an optimistic take: CBO’s belief the deficit will soon fall to “only” $430 billion in 2015, before rising in each subsequent year, rests on the hope our sluggish economy is about to achieve and maintain a growth rate not seen in a decade and a half.

Speaking of rosy forecasts, another new argument is that expanding Medicaid in Georgia by $4 billion a year over 10 years (the federal share) would create thousands of jobs and boost our economy by more than $8.1 billion a year, a 103 percent return on “investment.”

A review of federal jobs data and state health expenditures makes me skeptical. Using the most recent figures available for both, and adjusting them for inflation, a five-year average for both Georgia and the entire nation showed there was one direct health-care job for roughly every $200,000 spent on health care annually. That $8.1 billion economic boost assumes one direct health-care job would be created for every $110,000 spent.

It’s possible newer jobs would be created more efficiently. But if the earlier average of $200,000 per job held up, and even if we accept the study’s other multipliers, the return on “investment” may be closer to 20 percent — $4 billion in new spending creating $5 billion of activity — than 103 percent. That’s not worth raising state taxes to fund our share of the cost.

The bases for weighing the Medicaid expansion are whether the state can afford its portion, whether we can count on the feds to deliver on their promises, and whether we should expand Medicaid before reforming it. All three answers remain “No.”

– By Kyle Wingfield

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