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Blue States Balk at Funding Red State Health Care

December 29, 2009

The civil war over health care reform is rapidly becoming a war between the states. To great fanfare, seven state attorneys general - all of them Republicans - have promised legal action to block the Senate health care bill's Medicaid exception for Ben Nelson's Nebraska. But while the media have focused on the right-wing furor over the imbroglio derisively known as the "Nebraska Compromise," "Cash for Cloture" or the "Cornhusker Kickback," a second wave of protest is going largely unnoticed. As it turns out, blue states which have already expanded their own Medicaid programs face the double whammy of underwriting red state health care while receiving less federal support due to their own past generosity.
The New York Times detailed the quandary for several (mostly blue) states "pushing back against the Senate overhaul bill, arguing that it unfairly penalizes them in favor of states that have done little or nothing to extend benefits to the uninsured." That would be just the latest example of "red state socialism" in which a one-way flow of federal taxpayer dollars from Washington DC subsidizes programs in southern, Republican states:

With tax revenues down and budgets breaking, the states -- including Arizona, California, New Jersey, New York and Wisconsin -- say they cannot afford to essentially subsidize other states' expansion of health care.
The bill passed by the Senate on Thursday would move toward universal health insurance coverage in large part by expanding Medicaid, a program whose costs have traditionally been shared by the states and the federal government.
But the roughly 20 states that have already expanded coverage in some form will pay a greater proportion of their new Medicaid costs under the bill than those states, largely in the South, that until now have covered relatively few of their poorest residents.

As the Times explained, "governors in the states that have done more to broaden coverage are now lobbying their Congressional delegations to eliminate the discrepancies as the two chambers reconcile the bills," and with good reason:

Under the Senate bill, the federal government would pay the entire cost of expanding Medicaid to those not already eligible under state coverage for the first two years of the program. The following three years, states that do not now have expanded coverage would be reimbursed at a higher rate than those states that do -- in general, the states without expanded coverage would be paid back 95 percent of their costs, while those that have already expanded coverage would be reimbursed between 80 percent and 95 percent. Medicaid reimbursement rates are based on per capita income; wealthier states have smaller shares of their costs paid back.
The biggest hit to states that have already expanded will be in covering the people who are eligible now but have not signed up for coverage under the state's current program. They are expected to enroll because the new legislation will require almost all Americans to have insurance...
...For example, the federal government would pick up the entire cost for the first two years and 95 percent of the cost for the next three years for newly covered working parents in Alabama, which now covers only those making up to 24 percent of the federal poverty level.
But it would pay just 50 percent of the cost for most of those newly enrolled in California, because California already makes eligible working parents earning up to 106 percent of the poverty level and its Medicaid assistance is set at 50 percent. California would get a more generous reimbursement, about 83 percent, only for parents earning from 106 percent to 133 percent of the federal poverty level.

As it turns out, this battle is just the latest irony in the war over health care reform. As the data show, health care is worst precisely in those states where Republican poll best.
For starters, red state residents are the unhealthiest in the nation, as a November study funded by UnitedHealth Group confirmed. As Forbes noted, "the annual ranking looks at 22 indicators of health, including everything from how many children receive recommended vaccinations, to obesity and smoking rates, to cancer deaths." The diagnosis wasn't pretty for Republicans committed to denying the health care their constituents need most of all. The 2009 rankings reveal that nine of the top 10 healthiest states voted for Barack Obama in 2008. Conversely, 9 of the 10 cellar dwellers backed John McCain in 2008; four years earlier, the 15 unhealthiest states voted for George W. Bush for President.

Those dismal findings echoed the Commonwealth Fund's 2009 state health care scorecard published in October. As in 2007, it reveals the critical condition of red state health care. While nine of the top 10 performing states voted for Barack Obama in 2008, four of the bottom five (including Arkansas, Mississippi, Oklahoma and Louisiana) and 14 of the last 20 backed John McCain. (That at least is an improvement from the 2007 data, in which all 10 cellar dwellers had voted for George W. Bush three years before.)

Which brings us to the double-irony for Republicans obstructing health care reform in Congress. While their residents need health care reform most, the funding in large part would come from blue state taxpayers.
As the Washington Post informed it readers in May ("A Red State Booster Shot"):

Health-care reform may be overdue in a country with 45 million uninsured and soaring medical costs, but it will also represent a substantial wealth transfer from the North and the East to the South and the West. The Northeast and the Midwest have much higher rates of coverage than the rest of the country, led by Massachusetts, where all but 3 percent of residents are insured. The disproportionate share of uninsured is in the South and the West, the result of employment patterns, weak unions and stingy state governments. Texas leads the way, with a quarter of its population uninsured; it would be at the top even without its many illegal immigrants.

As it turns out, health care reform spending would be little different from the overall pattern of red state socialism. That is, red state residents disproportionately benefit from the steady exodus of tax dollars and earmarks spreading the wealth from Washington to their states.

But that is as it should be. Any American who cares about the quality and accessibility of health care for all Americans doesn't let his or her concern stop at the state border. But that doesn't mean Congressional health care conferees shouldn't come up with a more equitable Medicaid funding formula to ease the double-taxation of blue staters coming to the aid of their red state neighbors. As New York Governor David Patterson lamented:

"We are, in a sense, being punished for our own charity."

3 comments on “Blue States Balk at Funding Red State Health Care”

  1. The biggest hit to states that have already expanded will be in covering the people who are eligible now but have not signed up for coverage under the state's current program. They are expected to enroll because the new legislation will require almost all Americans to have insurance.


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Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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