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Sunday, January 12, 2020

Medicaid Expansion Causes Fiscal Panic

There were many of us who saw this coming. New York now takes the lead in cutting Medicaid spending. Notably, Expansion broke the camel's back.

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One of the foremost proposals from the radical left is a single-payer health care system. As a preamble to it, a wave of Medicaid Expansion has been sweeping across the nation. It is a safe bet that it will pop up in Wyoming; in fact, the path to Medicaid Expansion was cleared to some degree back in November when a majority on the Joint Revenue Committee went ahead with an Expansion bill. 

Very intelligent people will tell you that Medicaid Expansion is a revenue source because if you spend $100 to get $90 you end up with more money. Those of us who do not believe in Common Core math may reach a different conclusion, but what do we know?

Well, we do know, for example, that Montana did not benefit at all from Medicaid Expansion. Another state with Expansion problems is New York. From Spectrum News:
As the calendar flipped to 2020, Gov. Andrew Cuomo’s administration backed a 1 percent rate cut for the Medicaid program, a move that will reduce payments in the program by hundreds of millions of dollars. The development, announced with little fanfare in the State Register on New Year’s Eve, comes amid a $4 billion gap in the Medicaid program for the 2019-20 fiscal year and a $6.1 billion hole for the 2020-21 state fiscal year that begins April 1. 
But how is this possible? I thought Medicaid Expansion would bring in more money. The states that adopted it would be wading in cash up to their armpits. And if they didn't, it would all be because of global warming. 

So what does this rate cut mean? Well, you don't have to have grown up in a single-payer health care country to figure that out. All it takes is common sense. Spectrum News again:
The rate cut will affect payments to hospitals, nursing homes, doctors, those who provide home-care services and managed-care plans in the program. ... Overall, with federal matching funds taken into consideration, gross Medicaid payments would be reduced by $496 million. 
And that still does not solve the problem. The Empire Center, a center-right think tank in New York, explains that the cuts are
the Cuomo administration’s first public step toward closing a mushrooming deficit in the safety-net health plan that covers more than 6 million New Yorkers.
As the loyal taxpayers of New York are now finding out, this is only the beginning. Governor Cuomo and his Democrats are going into fiscal-panic mode. According to the Empire Center article, these cuts in Medicaid spending are 
about 3 percent of the amount Cuomo has said he intends to cut before the end of March. Officials say the state faces a $4 billion deficit in fiscal year 2019-20, which they intend to close by cutting $1.8 billion in spending and pushing $2.2 billion in expenses into future fiscal years. The state also faces a projected gap of $6.1 billion for 2020-21.
But hasn't New York done everything right? According to the tax hikers here in Wyoming, they have: first they jacked up spending across the board, and even more on their schools; then they raised every tax they could find, and invented new ones when they ran out of old taxes to raise; then they adopted Medicaid Expansion because $90 is more than $100.

And yet, here they are, going into a budget tailspin with panic-driven budget cuts from one end of the state government to the other.

But as the Empire Center reports, not even these cuts will work. Spending will still go up, forcing the state into even more budget reductions in the future. 

For years, I have been warning about this. The path to fiscal panic has three phases:

1. You build a big welfare state where spending is driven not by what taxpayers can afford, but by what you think people are entitled to.
2. When your spending model creates a structural budget deficit, you slowly but relentlessly raise taxes. Over time, this grinds the economy to a halt.
3. When your economy stops moving, you try to cut spending as much as you can, in as short a period of time as you can. The only goal you have is to cut spending. The consequences of your cuts are irrelevant - all that matters is that you balance the budget.

New York is now at this point. Wyoming will get there in a couple of years, perhaps as soon as next year if the latest CREG report turns out to be accurate. (I think it is, for reasons I will elaborate on in a separate article.) 

Either that, or our legislators use this session to start working on good, solid spending reform without having the panic devil breathing down their necks.

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