Health care reforms based on President Obama's priorities would affect each state differently. Each would experience lower overall economic activity as well as increased fiscal pressures on the state budget. In assessing the impact of Senator Kennedy's proposed health care reform, the CBO declares that:
...although the proposal would not change federal laws regarding Medicaid and CHIP, it would affect outlays for those programs. CBO assumes that states that had expanded eligibility for Medicaid and CHIP to people with income above 150 percent of the federal poverty level would be inclined to reverse those policies, because those individuals could instead obtain subsidies through the insurance exchanges that would be financed entirely by the federal government.
Other proposals address in different ways the situations of families in need. The House Tri-Committee Reform Proposal would force states to expand Medicaid eligibility to 150 percent of the poverty level and lock in current benefit levels. Although the federal government would cover new Medicaid enrollees under the plan, the lack of flexibility could damage the states' ability to manage their growing Medicaid costs. According to the CBO, the additional Medicaid coverage would cost the federal government an additional $438 billion over 10 years, with the 10-year total cost of the health reform program still in the $1 trillion range.
The Senate HELP plan would currently force states to expand Medicaid eligibility to 150 percent of the poverty level as well-without compensating them for the increased expenditures after five years. Should that proposal pass, the CBO estimate of total national Medicaid costs suggests that the states could be forced to spend an additional $189.7 billion based on current spending patterns, and assuming the federal government does not reduce its current share of Medicaid spending.
We include the potential state Medicaid cost in the federal budget estimate rather than in the state budget estimate calculated below because it is unknown how the health care reform package will ultimately address this issue. Our calculations are based on the assumption that the costs of the expanded Medicaid population are covered by the federal subsidies. Consequently, the additional costs are reflected in the $3,900 per person federal cost estimate.
In addition to the federal costs, the present value of the non-federally funded additional health care expenditures that the state governments will have to pay-if a health care reform based on President Obama's priorities was passed—is $138 billion, or $454 for every U.S. resident. These additional expenditures will need to be paid for through either higher taxes or spending cuts.
All told, combining the per person federal costs with the per person state costs, the present value of new government expenditures will cost every U.S. resident $4,354.
While this figure will hold true regardless of whether the federal or state government picks up the costs for expanding Medicaid, the source of funding for Medicaid expansion will have a major impact on state budgets.
The bill passed out of the HELP committee expanded Medicaid to 150 percent of the poverty level and assumed that the federal government would pick up the cost of the expansion for the first five years and then phase it into the state Federal Medical Assistance Percentages (FMAP). The House bill assumes the federal government would cover the cost of expansion (which appears to be 133 1/3 percent of the poverty level) and did not address if/or when they would push it back to the states.
Congress must still reconcile the 150 percent vs. 133 1/3 percent of the poverty level and the five years vs. no time limit of turning the costs over to the state. Given their inability to cover the costs (latest CBO of HR 3200 still has $239 billion deficit) states are in high jeopardy of having to assume the cost at least in five years. A significant caveat in the CBO analysis is that: They do not include certain costs that the government would incur to administer the proposed changes and the impact of the bill's provisions on other federal programs.
Regardless of the funding mechanism, state taxpayers and state economies would suffer from the heavy costs imposed under these health care proposals.
