Hoosier Tax-and-Spender

Editor’s note: This post was written on October 30, following a briefing by Indiana officials on Gov. Daniels’ proposed health care reforms.  It was posted briefly, then pulled when those officials asked ex post that the details be kept confidential until announced by the governor.  That happened today.

Indiana Republican Mitch Daniels received a grade of ‘D’ in Cato’s most recent governors report card, which grades the 50 governors on their record of cutting taxes and spending.  I’ve just returned from a briefing on a new health care proposal that Gov. Daniels has put together, and it doesn’t seem that he wants to improve his grade.

The Daniels proposal would:

  1. Increase cigarette taxes by 25 cents per pack,
  2. Use those funds to “pull down” additional federal Medicaid dollars (federal matching funds allow Indiana to almost triple their money), and then
  3. Offer new government subsidies to every able-bodied adult under 200 percent of poverty. 

In addition, it would have the state fund a health savings account (HSA) for each enrollee, and if an enrollee receives the recommended preventive care and does not touch their HSA funds (preventive care is 100 percent covered), at the end of the year an enrollee could withdraw $600 from their HSA to spend, say, on a color TV.  If he instead leaves that taxpayer subsidy in his HSA, he gets to roll it over and let it grow.  I’ve argued in a number of places that HSAs are not the solution to Medicaid, in part because they would resurrect within that program the same dependence problems that we tried so hard to kill in AFDC. 

Gov. Daniels is not proposing an entitlement, and participants would have to pay for a portion of their premium.  But those and other provisions (e.g., the income cutoff, the mandated benefits package, etc.) would be subject to revision on their way through the state house and by subsequent governors and legislators.  Pretty soon, it would be an entitlement, the participants’ contribution would be smaller, the HSA cash subsidies would be greater, the income cutoff would be increased, and the benefits package expanded.  How can I be so sure?  Because Indiana can do all these things and the feds will pick up two-thirds of the tab.  And heck, if this is a Republican proposal, where is the opposition going to come from? 

As I told the Gov. Daniels’ loyal foot soldiers, someone needs to shove this proposal in a drawer.  There is nothing worth saving. 

Where do Republicans keep coming up with these tax-and-spend health care ideas?  The party needs a health care revival, particularly when it comes to Medicaid.