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Monday, January 14, 2013

Arkansas's share of Medicaid expansion and the national debt

Posted By on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

Baby carrot Arkansas Medicaid expansion image

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here's the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.

There are two main arguments that we’re hearing from Republicans against Medicaid expansion. The first is that it’s going to cost Arkansas too much money once the state has to start footing a small portion of the bill (5 percent in 2017 and eventually 10 percent by 2021). The Department of Human Services in fact projects savings to the state’s bottom line greater than the costs, but Republicans express skepticism about those numbers.

Even granting a healthy skepticism, however, there is no doubt that expansion would save a great deal of money on the state’s bottom line through 2016, and almost certainly would continue to save money through 2020.

The second argument is that, okay, maybe it’s saving the state money, but those savings are coming from federal spending. Conservatives point out that federal spending comes from federal tax revenues, which all Americans, including Arkansans, have to foot the bill for. They say that we can’t afford more spending because of the national debt. This is the line House Majority Leader Bruce Westerman (R-Hot Springs) has been pushing and House Speaker Davy Carter (R-Cabot) referenced in his speech at the Clinton School Friday when he said, “If they’re not going to address [the debt] in Washington, we’re going to address them here…at the state level.”

Now, obviously there is plenty of disagreement about the right level of spending on the national level (and we might point out that Arkansans pay in less and receive more compared to other states), but unlike hand-waving at projections of savings from expansion that offset many of the costs, it’s a coherent and principled objection. The reason that it’s such a great deal for Arkansas is because of federal money, and that money adds to the debt.

But keep in mind the baby carrot next to the Stephens building. That’s the amount that Arkansas could chip away at the debt by saying no to expansion.

Of course, for some conservatives, turning down debt-financed federal money is a matter of principle. And fair enough. But it will be interesting to see how that plays in the debate over what’s best for Arkansas, because principle isn't going to provide healthcare coverage to our neediest citizens and fuel new tax revenues and create jobs and save hospitals…

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