A news service for the people of Michigan from the Mackinac Center for Public Policy

Government establishment interests are pulling out all the stops to promote an optional state Obamacare Medicaid expansion, not just in Michigan but around the country.

The lobbying of hospitals and other health care special interests has already been reported, but it’s not the only source.

For example, press reports are describing a report last week from the bond-rating agency Moody’s Investor Services suggesting that, because Obamacare cuts some extra money given to hospitals that treat especially high numbers of Medicaid patients, states that don’t go along with the expansion will lose out, potentially damaging the credit-worthiness of either the state itself or of some hospitals.

That may sound scary to legislators currently debating the issue — maybe scary enough to make them support the expansion, even if they suspect it will become a “roach motel” that traps their states into unaffordable extra spending down the road.

But hang on a minute! Just a few weeks earlier Moody’s issued an unrelated warning that nine states may suffer credit rating declines in part because they have particular “economic sensitivity to federal spending reductions (or) dependence on federal transfers.” In fact, Moody's warned states that it would be considering their Medicaid spending itself as a key indicator of whether they are too dependent upon federal money.

That makes sense, because Medicaid is by far the largest source of federal transfers that flow through state governments, and the Obamacare expansion of the program represents a massive increase in those transfers.

So which is it, Moody’s?

Many questions have been raised about the federal government’s future ability and willingness to back its promise to cover 90 percent of the Medicaid expansion’s cost from the year 2020 forward in perpetuity.

Weighing the risks, it seems that states should be even more worried about increasing this source of “dependence on federal transfers” than some comparatively minor change in Medicaid funding details.

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Update, March 20, 11:40 a.m.: The House appropriations subcommittee crafting a Department of Community Health budget for the next fiscal year has reported a bill that does not include the Medicaid expansion.

No one should imagine the issue has been settled, however. This is just the first of many steps in creating a final state budget for next year that probably won’t arrive on the governor’s desk before June. There is plenty of time for the special interests who are pulling out all the stops for the Medicaid expansion to persuade Obamacare-shy Republican majorities in the House and Senate to go their way.

 

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