Thursday, December 27, 2012

Even Supporters Fear Obamacare’s Impact on States

An eye-opening article in yesterday’s Los Angeles Times shows the dilemma states are facing as they begin to make crucial policy and budgetary choices surrounding Obamacare.  The article notes that the law “takes states into uncharted territory” as they attempt to estimate the fiscal impact of Obamacare’s massive Medicaid expansion:

California, which plans to expand coverage to hundreds of thousands of people when the law takes effect in 2014, faces myriad unknowns.  The Brown administration will try to estimate the cost of vastly more health coverage in the budget plan it unveils next month, but experts warn that its numbers could be way off.  Officials don’t know exactly how many Californians will sign up for Medi-Cal, the public health insurance program for the poor.  Computing the cost of care for each of them is also guesswork.  And California is waiting for key rulings from federal regulators that could have a major effect on the final price tag, perhaps in the hundreds of millions of dollars….

Unanticipated costs associated with the healthcare changes could undermine California’s efforts to improve its standing on Wall Street and keep the economy moving.  They could force fresh cuts in services if they consume much more of the state budget than Brown is able to approximate….

Gov. Jerry Brown expressed a new concern in an interview last week.  He said recent signs from Washington suggest the federal government may not pay as much of the costs associated with the new law as originally promised, sticking states with a larger share of the bill.  “As the guardian of the public purse here, I have to watch very closely what may come out of Washington,” the governor said.  “So we’re going to move carefully.  We want to make sure the federal government is on board.”

These statements of caution and concern come from a major supporter of the law.  And little wonder: Over the past two fiscal years, states had to close a combined $146.3 billion in budget gaps – yet Obamacare is about to impose new unfunded mandates on states of at least $118 billion.  Both the numbers, and the diffident attitude from the governor of the largest state in the union, should serve as a cautionary tale for states contemplating the massive fiscal hit Obamacare will impose on their budgets.