ObamaCare will squeeze education, other needs

Geoffrey Lawrence

Often lost in the debate over the Patient Protection and Affordable Care Act (PPACA) — the sweeping health care "reform" legislation popularly known as ObamaCare — is the negative impact it will have on education, public safety and other public services as health insurance subsidies begin to consume a greater share of state spending.

Congressional Democrats claimed, when passing PPACA, that the dramatic expansion of entitlements it entailed would actually lower the federal deficit. They were only able to make this claim, however, because they had intentionally shifted most of the bill's costs forward into the future — beyond the 10-year window of costs examined by the Congressional Budget Office — and also down upon the states. Indeed, a central component of the plan is to enroll an additional 16 million individuals in state Medicaid programs.

State Medicaid programs are jointly funded by federal and state governments according to a formula determined each year based on a state's median per-capita income level. States with lower incomes receive a greater share of federal dollars into their Medicaid programs, but in no case does the federal share account for less than 50 percent. In Nevada, federal funding will account for 59.26 percent of Medicaid costs in the 2011-13 budget cycle — an increase from recent years. This leaves state taxpayers directly liable for 40 percent of the program's costs.

A recent analysis conducted by the Nevada Policy Research Institute shows that, even prior to the passage of PPACA, Medicaid spending in the Silver State was on an unsustainable path. Medicaid cost increases have outpaced the growth in gross state product for more than a decade, as Medicaid has become the fastest-growing expenditure in the state budget. With 268,000 enrollees, 10 percent of the Nevada population is currently enrolled in Medicaid at an average cost of $4,770 per person. Even without PPACA, by 2023, the number of enrollees is estimated to increase by 112,000, growing to encompass 12 percent of the state population.

PPACA will only exacerbate this growth. First, the program loosens the eligibility requirements for Medicaid from 100 percent to 133 percent of the federal poverty level. As a result, 267,000 newly eligible individuals are expected to enroll in Nevada Medicaid by 2023. While PPACA stipulates that the federal government will pay all the costs of covering this newly eligible population between 2014 and 2016, the level of federal support will taper to 85 percent thereafter and may eventually fall to the standard federal match rate (currently 59.26 percent).

At the same time, the individual mandate provision within the legislation will induce an estimated 104,000 individuals, who were eligible under the old rules but, for whatever reason, elected not to join, to enroll in Medicaid by 2023. There is no provisional federal match rate to help states finance the cost of caring for these individuals. As such, the additional financial burden faced by state taxpayers is even more significant with regard to the "old eligible" population than with the "newly eligible" population.

Combining these two populations, PPACA will expand the number of Medicaid enrollees to nearly 800,000 by 2023.

Under a variety of assumptions regarding the future of federal match rates for the newly eligible population, the legislation will increase state Medicaid costs from $5.4 billion to $5.7 billion over the period from 2014 to 2023. When added to the $11.99 billion that Nevada taxpayers are projected to spend on Medicaid over the same time period without PPACA, the total approaches $17.7 billion.

With an additional $5.4 billion being diverted from state coffers by 2023 in order to finance a dramatic expansion of Medicaid, lawmakers will necessarily find themselves with that much less money to spend on education, public safety, economic development and other areas of state spending.

Indeed, PPACA seeks to reorder the priorities of not just Nevada, but all 50 American states.

Under any fair reading of the Ninth and Tenth amendments to the U.S. Constitution, the legislation is, on its face, unconstitutional.

Geoffrey Lawrence is deputy director of policy at the Nevada Policy Research Institute. For more information visit http://npri.org.This article originally appeared in the August 2011 edition of Nevada Business.


Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.