By Chuck Warren, September Group, LLC; Salt Lake City, Utah
Entitlement programs consume an inordinate share of government spending and are the main driver of federal deficits. Not surprisingly, the three largest in the federal budget are Medicare, Social Security and Medicaid. All entitlements.
States aren’t able to print their own money and each year must balance budgets, making new entitlement programs a very serious commitment. Despite Utah’s fiscal discipline, these programs continue to increasingly encroach on other state needs, taking up a growing share of our budget each year.
Though our state rejected Medicaid expansion under the ACA (Obamacare), Medicaid spending in Utah has increased 77 percent in 15 years and is projected take a full 30 percent of our general fund by 2020.
Because the majority of newly insured individuals nationwide receive health coverage not through private plans but through Medicaid, the pressure on entitlement spending across the country is growing. As the word itself denotes, once people are granted entitlements they feel, well, entitled. And how does a government ever really pull that back?
In a recent New York Times article, Robert Frank explained repeal of the ACA would “precipitate a political firestorm of epic proportions” because of a well-known concept among social scientists called loss aversion. Frank explains that we humans are willing to expend greater effort resisting the loss of something we already possess than acquiring something we don’t already have.
Unfortunately, this means very difficult choices need to be made in states that already chose to expand Medicaid. State cost sharing begins this year and expansion costs are not only 49 percent higher per enrollee than projected, the number of enrollees far exceeds estimates. States are left with the decision of either pulling money from priorities such as schools, roads or other social service programs or simply doing away with expansion altogether. Good luck with that. See above, “loss aversion.”
Medicaid expansion under Obamacare didn’t allow any coverage cap or limit on state dollars. Once the program was implemented, the state became responsible for its share of costs regardless how high they might go. Those championing Healthy Utah claimed once the state had to start paying, or once the costs were simply too high to afford, the entire program could simply be dumped. Not only is this cruel, but the political reality is it would probably never happen. The Medicaid expansion would have continued to suck the life out of other state programs for decades.
Initial numbers on Governor Herbert’s Healthy Utah plan indicate a state cost of $40 million by 2020. One year later that number had risen to $80 million and the overall cost had gone from $400 million to $800 million. These are staggering figures for a proposal that would cover a very small portion of our state population and based on the assumption only half of those eligible would enroll. Average enrollment has been more than double projections nationwide and we have no reason to believe Utah would be different.
If the governor were to have succeeded in passing Healthy Utah, our state could easily have faced a bill of $80 million this year, with $160 million in obligations by 2020 when we are required to pay 10 percent of the program’s total cost. That $80 million probably would have had to be taken from the $115 million weighted pupil unit increase received by public schools this year. There is simply no other budget item big enough to cover the cost.
Where would we find an additional $160 million, year after year, in just a few short years, to continue funding this program?
House Speaker Greg Hughes saw this coming while some in other states, and some in our own, chose to shield their eyes and pretend the truth wasn’t there. That day of reckoning will be painful not only for them but for those who suffer with the consequences of their poor choices.