December 22, 2008 3:35PM

No Medicaid Bailouts

Claiming hardship due to _________ (noun), state governors and legislators are demanding that Congress give them more money for their _________ (noun) programs. Of course, the states do this every time a _____________ (frequent, predictable occurrence) happens.

This time, the states want more money for their Medicaid programs. Again. The states claim their Medicaid rolls are swelling due to the economic downturn. Yet economic downturns are predictable — completely so, even if the timing isn’t predictable. The effect of an economic downturn on Medicaid enrollment is also predictable. Thus, bailing out the states right now would essentially reward them for not planning for the future.

Here’s how the AP reported my take:

Medicaid insures nearly 1 in 6 … people in the United States. The program typically covers the very poor and about half of enrollees are children. Spending came to $333 billion in the budget year ending Sept. 30, 2007. Washington picks up about 57 percent of that; the states cover the remainder.

Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank, sympathizes with new families now relying on Medicaid. Still, he disagrees that the federal government should reward states that did not plan adequately for the bad times. Better planning would mean setting aside more money for rainy‐​day funds and not expanding the scope of Medicaid during the good economic times, he said.

“The states make these promises they know they can’t keep and then they run to Congress to bail them out,” Cannon said. “And Congress typically ends up bailing them out.”

Cannon said the net result is that the government gradually is becoming more responsible for paying for health insurance coverage.

As I wrote last year, the states play the same game with funding for the State Children’s Health Insurance Program:

States such as Georgia sometimes spend all of their allotted SCHIP funds before the end of the fiscal year. The CBO estimates that 11 states will do so in 2007. Typically, those states then petition the federal government for additional funding. So far, Congress has twice bailed out such states, effectively rewarding states that commit to spend more federal dollars than they have been allotted.

To stop this racket, we need Medicaid/SCHIP reform. A federal balanced budget amendment wouldn’t hurt, either.