| August 17, 2012

Obamacare's cost-shifting doesn't do taxpayers any favors

Common sense dictates that cost-shifting does not save money (whether I pay for dinner or you pay for dinner doesn't change the cost), but advocates of Obamacare insist that the law will save money by forcing federal taxpayers instead of state taxpayers to pay for the expansion of Medicaid. In a recent piece, The Oklahoman editorial board further dismantles that specious claim:

Some state officials say Oklahoma would “save” about $47.8 million a year if the state accepts the Obamacare-driven expansion of Medicaid. That would shift to the federal government part of the current cost of treating those with mental health problems. Currently, the state pays for treatment through the Department of Mental Health and Substance Abuse Services, the Department of Corrections and the state Health Department.

Of course, those savings are all on paper. Oklahomans pay state and federal taxes. Shifting the cost from one side of the ledger sheet to the other doesn't make any difference for those paying taxes into both columns.

Put another way, if you siphon gas out of your car and into your truck, you aren't saving money on truck fuel. You're just refueling your car more often. The fact that Obamacare supporters tout the government-finance version of a siphon hose as a major policy achievement shows just how flawed this law is. ...

At some point, the cost-shifting ends and payment begins. When that occurs, American taxpayers will be the ones to foot the bill, whether local, state or federal.

Fortunately, Oklahomans need not fall for the tempting delusion of "free" money from the federal government to expand Medicaid. The Supreme Court, of course, ruled this summer that states may opt out of the expansion. If Oklahoma cannot afford to expand Medicaid without help from the federal government, it really cannot afford to expand Medicaid with help from the federal government, as my colleague Brandon Dutcher explains:

State appropriations account for less than half of ... total state spending. Much of the spending is federal money, which many in the political class seem to think of as “free” money. It’s not. As Manhattan Institute fellow Heather Mac Donald recently pointed out: “The federal government’s biggest con game is promoting the fiction that federal dollars doled out to states and localities are ‘free’ money — whether the Medicaid funds at stake in the Obamacare decision, food-stamp reimbursements, job-training money or grants to local colleges for minority education in the sciences. …

“Federal transfers are not even a zero-sum proposition; they are a negative-sum proposition, leaking value at every step of the way, thanks to the costs of collecting federal tax dollars, then trickling them back out to the states’ own costly bureaucracies via federal paper-pushers who write and oversee grant programs.

“And yet this massive Ponzi scheme allows the federal government to wield enormous power in the illusion that it is conferring on states and cities free money from some mysterious external source outside of their own businesses and residents. (The only arguable source of such money from beyond local sources would be money borrowed from China, say, which then gets magnanimously doled out to the states by wise federal bureaucrats, but even there, we — not ‘Washington’ — pay the interest on the borrowed funds.)”

Some Oklahoma politicians object that they shouldn’t take the rap for their spending spree because this federal money is the federal government’s problem. But of course that doesn’t wash. No one is forcing state policymakers to chase all this federal money. Moreover, chasing the federal money spurs higher state spending.

In fact, even just maintaining Medicaid could require states to cut education funding or raise taxes. In light of that fact, Oklahomans should arguably be discussing whether to go nuclear on Medicaid instead of whether to expand it.

If that sounds extreme, consider a basic truth that too often goes unobserved: Money does not equate with good health (or, for that matter, a worthwhile education or effective law enforcement). Throwing more money into a broken system does nothing but waste money. If we're serious when we say we want Oklahomans to be healthy, we won't just look to the government for more dollars to cover the cost of medications and procedures. Instead, we'll take care of ourselves, exercising and eating wisely -- and we won't need a push from the First Lady or a heavy-handed government ban on sugary sodas to do it. We'll forgo vacation or the latest household appliances or appealing upgrades to our cars to voluntarily purchase health insurance.

Yes, we need policy solutions to the rising costs of and lack of universal access to health care, but we also need private solutions. The best part about such solutions: We don't have to wait for lawmakers to enact them. If good health and the insurance coverage to ensure it isn't a priority for individual Americans, why should it be a priority of the government? Surely we're not yet so uncivilized as to need government officials to force us to do what is wise.

A mature response to the reality that life is precarious might be to support the creation of a government-run health care system (leaders in Britain and Canada, among others, seem to think so), but I'd argue the more mature response would be to develop personal discipline, prudence and humility -- discipline to maintain good health, prudence to provide for unavoidable health disasters (i.e. buy insurance!) and humility to accept that, no matter how advanced medicine becomes or how desirable and good it can be for us to avail ourselves of life-extending options, illness and death have ever been a part of the human condition and ever will be.

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