RALEIGH – When it comes to the political relationship between Washington and Raleigh, the old saying applies: he who gives can also take away. The “he” in the current situation is Barack Obama, though the rule has applied in past administrations, too.
So far this year, President Obama’s Big Give to Gov. Beverly Perdue and other North Carolina politics has been a massive federal bailout. Essentially, the federal government’s “stimulus bill” fiction helped state politicians evade their constitutional responsibilities. Faced with a big budget deficit, Perdue and state lawmakers were forbidden by the state constitution to issue public debt to paper it over. Their only legal options were to reduce spending or raise taxes. The Obama administration gave them (and politicians in other states) a third option – let Washington issue the debt. Over the next two years, some $3 billion of North Carolina’s budget will be financed through this extra-constitutional borrowing.
Now it’s time for the Big Take: ObamaCare. No matter what the final version of federal health care legislation looks like, it will rely heavily on a huge expansion of the Medicaid program, jointly funded by Washington and the states. If passed, it could bring hundreds of thousands of North Carolinians onto the Medicaid rolls for the first time – costing North Carolina taxpayers billions of dollars, some of it at first via state taxes and the rest of it later via federal taxes to pay off federal debt.
The only question right now is just how huge the Medicaid expansion will be. House committees have endorsed legislation raising eligibility to 133 percent of the federal poverty line for a large swath of the population. Some House and Senate leaders want to raise that figure to 150 percent.
According to the Heritage Foundation’s analysis of the lower figure, North Carolina’s Medicaid caseload would shoot up 44 percent under ObamaCare – faster than the national average of 37 percent. Simply put, that would wreak havoc on the state budget.
Before you assume the flip side of the argument is true, that North Carolina’s uninsured population would drop by 44 percent, you have to remember that most of the people in that targeted income range are currently insured. There are more people between 100 percent and 150 percent of poverty who have private health plans than there are people in that range who lack insurance for all or part of a given year. Given a choice between buying a health plan at market prices or securing it for little to nothing from the government, rational individuals and employers will opt for the latter. It is hardly in the interests of North Carolina taxpayers as a whole to shoulder the health care bills of the currently insured, whatever you think of the merits of offering subsidies to the currently uninsured.
Medicaid has been a major driver of North Carolina’s budget growth for decades. Those who would have liked to see more education spending, infrastructure investment, or tax relief since the late 1980s can assign primary blame to the Medicaid explosion. If any version of ObamaCare passes the Congress, it will further constrain North Carolina’s fiscal choices.
That’s why so many governors, Democratic and Republican, are up in arms about the current legislation. They’d dearly love another bailout – in the form of the federal government picking up a higher share of current expenses for Medicaid and other state health programs. But what they’re likely to get is another big hole in their fiscal ships of state.
The problem for North Carolina isn’t just another unfunded Medicaid liability. Because of the way the various health bills structure the subsidies for “private” insurance, states such as North Carolina with relatively low medical costs will end up subsidizing states with higher costs. North Carolina taxpayers will also end up bailing out failed “public options” in other states, such as Maine’s Dirigo Health.
There are better solutions to the health care challenge, solutions based on consumer choice, competition, and personal responsibility. They wouldn’t turn the medical industry or state budgets upside down. They wouldn’t raise taxes or force people to buy insurance products they don’t like. They wouldn’t give federal bureaucrats more power over the private lives and medical decisions of families.
They are, in other words, a bit too sensible to be passed at the moment. Best wait for a better moment.
Hood is president of the John Locke Foundation