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Bloomberg Misses Obamacare Medicaid Time Bomb

Bloomberg’s Pat Wechsler has a very good March 23rd article titled “States Sue Over Overhaul That Will Bust State Budgets.” Wechsler reports:

President Barack Obama faces a fight over the health-care overhaul from states that sued today because the legislation’s expansion of Medicaid imposes a fiscal strain their cash-strapped budgets can’t afford.

Florida, Texas and Pennsylvania are among 13 states that filed suit after the president signed the bill over the constitutionality of the burden imposed by the legislation. The health-care overhaul will make as many as 15 million more Americans eligible for Medicaid nationwide starting in 2014 and will cost the states billions to administer.

Wechsler goes on to detail how Medicaid spending is already growing faster than state revenues to pay for the program, but he neglects to mention one key way in which the reconciliation bill passed by the House would make the situation even worse: it includes a fiscal time bomb in the form of drastic cuts to how much the federal government will compensate states for their Medicaid spending. Heritage Foundation fellow Ed Haislmaier explains:

Specifically, section 1202 of the reconciliation bill requires state Medicaid programs to pay primary care doctors rates for Medicaid patients that are equal to Medicare rates for two years in 2013 and 2014. This mandated physician pay hike would apply to services provided to all Medicaid patients, not just the “expansion population.” The federal government would also pick up 100 percent of the extra costs for this provision as well.

But then what happens twenty-four months later on January 1, 2015 when the federal funding to cover the extra cost of that pay hike, goes away?

States like New York, California, New Jersey, Rhode Island, Florida, Minnesota, Michigan, and Illinois will all see their Medicaid reimbursement rates rise between 90% - 300% for two years. This will make it easier for Medicaid patients to find doctors, doctors to stay in business, and states to stay solvent.

But in 2015 the flow of money from the federal government plummets and these states will either have to slash Medicaid payments to doctors (which means either bankrupt doctors or doctor-less patients) or these states will go broke.