OCPA column: Clinging to belief in the "free lunch"

Clinging to belief in the “free lunch”

By Jonathan Small

While your parents probably warned you there’s no such thing as a free lunch, meaning a price is always paid, that’s a lesson lost on many policymakers. An obvious example is the continued argument that Oklahoma is allowing “our share” of Medicaid dollars to go to other states because we have not added able-bodied adults to the program as allowed by Obamacare.

Those who make that claim either don’t understand how Medicaid expansion is funded—through increased federal debt—or they don’t care and are willing to mislead Oklahomans. Contrary to the claims of expansion proponents, there isn’t a pot of federal money for Medicaid expansion that is simply divided by the number of states choosing to participate. Instead, Medicaid spending increases every time the program is expanded.

U.S. Sen. James Lankford, R-Oklahoma City, recently pointed out how Medicaid-expansion finances really work. If Oklahoma were to expand Medicaid, there would be a 90-10 federal-state cost split. Lankford noted Oklahoma expansion would require a “pretty significant increase” in federal spending, but the federal side would be funded via debt while state government would have to make real financial choices.

“The federal government has the great benefit of we just print more money,” Lankford said. “We don’t have to worry about having it balance. Oklahoma’s government has to figure out how they’re going to tax more, what they’re going to do less of, because they’ve got to balance at the end of it.”

As originally passed in 2010, the Affordable Care Act included numerous tax provisions that paid for the law–on paper. But many of those taxes have never taken effect, have since been repealed, or both. To cite just one example, the Democratic-controlled U.S. House of Representatives voted in July to repeal the ACA’s “Cadillac tax,” which has not taken effect but will eventually impose financial penalties on those whose insurance plans are considered too lavish, including plans serving many states’ teachers.

Put simply, Obamacare was never truly “paid for” and today is substantially funded by increasing debt.

The U.S. government’s public debt is more than $22 trillion and on pace to hit $28.7 trillion by 2029. Medicaid expansion plays a significant role in that growth. At a recent meeting of the legislative Healthcare Working Group, Clay Farris, an official with the consulting firm Mostly Medicaid, pointed out that Medicaid’s nationwide spending totaled $7.2 trillion from 1966 to 2014, including both state and federal funding. The program is now projected to spend $5.5 trillion total from 2014 to 2022. “We’re going to have spent almost as much in eight years as we did in the first 50 years,” Farris said.

Oklahoma’s decision to (so far) decline Medicaid expansion not only reduced welfare dependency in this state, but also reduced the debt burden handed down to our children.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.