On the utter ridiculousness of Medicare and Medicaid, and how the federal government chooses to fund these inanities.
Via today's Wall Street Journal:
It is within this context that we should view the National Governors Association's meeting in Washington this week. Like all interest groups, the states' chief executives are determined not to leave town empty-handed; and every year a top agenda item for them is getting more federal dollars to cover the ever-expanding cost of Medicaid. And who could blame them? After all, the federal government created Medicaid as a tiny program in the 1960s. Today it eats up, on average, about a quarter of each state's budget and grows every year at a rate that outstrips inflation and threatens to gobble up dollars needed for education and other priorities.
... With the federal government paying half or more of every dollar spent on Medicaid, states were essentially leaving federal dollars on the table by not expanding the program.
... Yet Mr. Hubbard isn't the only state lawmaker who has figured out that he can leverage the federal Treasury to his advantage by expanding Medicaid eligibility. New York is well ahead on this learning curve. According to a recent study published by State Policy Reports, the Empire State receives more federal dollars per capita than any other state and more than twice the national average.
Which sounds remarkably similar to what we proffered on May 31st, 2005:
The federal government entices states to maximize spending on social programs by proffering funds from the federal coffers to match those expended by the states. These federal outlays are often several times greater than those dedicated by the budgeteers at the state level.
For instance, Texas receives $1.52 from the Federalies for every $1 they spend on Medicaid. That total jumps to $2.57 for every Lone Star tax dollar dedicated to the Children’s Health Insurance Program (CHIP).
In other words, you get $3.57 worth of vote buying power via CHIP for only $1 spent by you at the state level on the effort.
... In times of plenty, as were the surplus years of the late 1990s, there are many votes to be purchased on the cheap. But when economies slacken, as they did after September 11th, 2001, governmental overages submerge and the rollbacks on the social excesses wound elected officials exponentially more than the dollars saved assist them.
Because, of course, conversely, for every $1 you roll back on CHIP, you actually lose $3.57 worth of program. The fiscal bite is much worse than the bark, as it were.
All of this is hardly a formula for fiscal discipline. Inbuilt in the system is the perpetual perverse incentive to spend more, and more, and then more again. And to never reduce a dime’s worth, because it will cost you four bits to do so.
This is one of the main (and many) reasons why states throughout the nation are currently awash in crimson ink, as they try desperately to hold on to federal matching funds by continuing to spend state money they no longer have.
As we witness the inglorious spectacle of fifty state Governors, Republicans and Democrats, conservatives and liberals, wading into Washington with one hundred hands outstretched, it helps to be reminded at least in part why that is.
