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States Can Impose Fiscal Discipline on Washington

November 14, 2014

As the battle over Medicaid expansion rages, supporters of expansion have dusted off an age-old favorite in making the case for taking federal dollars – “If our state doesn’t take the money, those dollars will just go to some other state instead.”

Happily, in this instance that is not true. When a state declines to expand Medicaid, no other state will receive its share of funds and federal spending declines. Originally, Washington was expected to spend roughly $950 billion expanding Medicaid between 2014 and 2022. Each state that declines to expand Medicaid relieves strain on the overall federal budget.

State governments generally don’t have much of an impact on the federal budget, but NFIB v. Sebelius gave state lawmakers the unique opportunity to veto hundreds of billions of dollars in new federal spending. Supporters of Medicaid expansion say that one state opting out won’t make a difference—that the amount of money is a mere drop in the bucket. But states joining together to say no to Medicaid expansion will make a significant impact.

The federal tab for Medicaid expansion has been reduced by more than $424 billion over the next eight years thanks to the 18 states that have already opted out. If the 12 still-undecided states also opt out, there will be an additional $185 billion in savings.

The more than $609 billion in savings from these 30 states would represent over 50{010c6536f15f83a69f09c4467fdfb4a5656804feab27fe0dec71ed1e80da306f} of the expected federal spending on the expansion. A drop in the bucket? That’s more than seven times the $85 billion in 2013 sequester cuts and more than half the federal deficit for this year.

In addition to protecting the federal budget, states that decline to expand Medicaid will protect their own budgets as well. Arizona has experience with Medicaid expansion. In 2005 alone, Arizona’s Prop 204 expansion was projected to cost $315 million, but the actual cost that year was over $1.3 billion. The year 2005 wasn’t an anomaly. Arizona’s cost projections for the last expansion were off by over 400{010c6536f15f83a69f09c4467fdfb4a5656804feab27fe0dec71ed1e80da306f} each year. It is likely that the expansion proposed under Obamacare will have similar results.

State lawmakers fed up with federal spending finally have a chance to do something about it; they just have to make the hard decisions that will be required to balance the books.

Christina Corieri is a health care policy analyst at the Goldwater Institute. A longer version of this article originally appeared in the Wall Street Journal.

Learn more:

Wall Street Journal: States Can Impose Fiscal Discipline on Washington

Kaiser Family Foundation: The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis

Goldwater Institute: 10 Reasons To Decline Medicaid Expansion in Arizona

Heritage Foundation: 10 Myths About The Obamacare Medicaid Expansion



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