Medicaid expansion likely to be a financial disaster for Colorado
Albert Einstein reportedly called compounding interest the most powerful force in the universe. He knew of what he spoke. Compounding interest is that irresistible force which transforms the cost of a $300,000 house into one with a true price tag of something more like $500,000 over the life of a mortgage.
Compounding interest also works in our favor, making our savings grow. It is the reason bankers are rich.
In Colorado’s state Capitol, the state’s Democratic leadership, with the encouragement of Gov. John Hickenlooper, is about to enact a sweeping expansion to Medicaid that will turn compounding interest into the enemy of our state budget.
Hickenlooper and the Democrats support a massive new Medicaid expansion that will, in time, turn the state’s balance sheet into more of a mess than it already is.
Medicaid is the Great Society-era program that provides health insurance to low-income families and individuals. Obamacare proposed something well beyond that safety-net status. It requires states to expand Medicaid eligibility so drastically that, eventually, the program would become the single-payer, government-run health program liberals have long craved.
While upholding Obamacare’s individual mandate, the Supreme Court struck down the mandatory Medicaid expansion, saying the entitlement expansion had to be made optional to the states.
Lured by the chimera of “free money” — under Obamacare, the feds promise to cover 90 percent to 100 percent of all costs associated with the latest Medicaid expansion — many states, including some governed by Republicans, have opted into the Medicaid expansion.
In Colorado, Hickenlooper announced early this year that he would take advantage of the free-money offer. With the federal government promising to pay for at least 90 percent of the costs through 2020, Hickenlooper said he would roll up his sleeves and make Medicaid so efficient that paying for the other 10 percent wouldn’t impact the state budget all that much — only about $125 million over a decade.
Hickenlooper has wooed business support for the Medicaid expansion. Higher Medicaid participation will, he argues, gradually reduce the cost-shifting associated with uncompensated care and thereby benefit those depending on private insurance.
Turning Medicaid into something close to Colorado’s version of single-payer care on the installment plan will, he argues, be good for us all and will pay for itself.
Sound good? Many in the business community think so.
The problem with the governor’s bold statements is they are nonsense.
First, Medicaid expansion is not free just because the feds are ponying up 90 percent of the costs. We are paying for that. Actually our kids are. All 90 percent of that “free” money will tack another several zeros onto the national debt.
Second, what happens when that “free” federal money dries up in 2020? The state will almost certainly have to pick up the slack, and schools and other programs will suffer.
Third, the notion that the state is going to whack hundreds of millions in savings to pay for the state’s share of the entitlement expansion is an impossible promise that never will be so. If wringing efficiency from Medicaid were such a snap, why hasn’t he done it already?
The truth is, the whole efficiency argument is an elaborate talking point, and Medicaid expansion will harm the state’s budget in the short term. It will crowd out funding for schools and roads. It will hasten talk of a budget crisis and the necessity for new taxes.
Last, the fanciful idea that Medicaid expansion will reduce the cost of private insurance is actuarial baloney. Colorado has greatly expanded Medicaid in the last decade. Has your health care bill decreased? Has Obamacare succeeded in bending the cost curve? Has socialized health care in Europe contained costs? Has socialism ever made anything cheaper — as in, ever?
In the end, what makes Hickenlooper’s Medicaid expansion so irresponsible is the combination of compounding interest and those very same spiraling cost increases in health care — more people eligible for a program that, year over year, costs a lot more than it did before.
Off to insolvency we go! Einstein’s most powerful force, meet Colorado’s state budget. What happens next won’t be pretty.
Josh Penry is a former minority leader of the Colorado Senate. He is a graduate of Grand Junction High School and Mesa State College.