Medicaid Expansion: Wisconsin’s Pathway to Insolvency

It all sounds so appealing. The federal government is telling us that if Wisconsin agrees to expand Medicaid coverage to an additional 235,000 adults who earn below 133% of the federal poverty line that the federal government will pick up 100% of the tab for three years and 90% of the cost after 2017. Proponents of expansion say that this would mean an additional 4 billion dollars in free money flowing into Wisconsin over the next few years. It sounds too good to be true and history has shown us that it probably is. The federal government has made a career of promises to fund programs, only to later go back on their word. All too often these broken promises have left state governments scrambling to find other means of funding, robbing them of the money needed to pay for state priorities like education, infrastructure, community support and job training.

In 1975 Congress passed the Individuals with Disabilities Education Act, better known as the IDEA Act, for the purpose of guaranteeing a free public education to all children with disabilities. At the time of its passage, Congress promised that the IDEA Act would use federal funds to pay for 40% of the cost of the program as a way to alleviate the extra burden placed on state and local budgets.

Almost forty years have passed and the federal government has never come close to keeping its promise of 40% funding. The actual annual federal commitment to the cost of implementing the program has fluctuated between 17% and 20%. Because the IDEA Act demands that children are offered a free education in the least restrictive environment regardless of how high the cost, special education spending has skyrocketed since the law’s passage. In spite of the fact that President Obama made full funding of the IDEA Act one of his key campaign promises in 2008, states are now facing the prospect of having to cover even more of the cost due to the financial crisis in Washington.

A few years ago the big idea coming out of the White House was a plan to reinvent how Americans traveled by investing billions of dollars in a national high speed rail system. While states would be on the hook for portions of the cost, the President promised huge sums of federal support to anyone that broke ground on new passenger rail lines. After a long, contentious debate, several governors rejected the federal rail money amidst concerns that the federal government would be unable to keep its funding promises. These governors feared that when promised federal dollars failed to materialize, their states would face the prospect of either having to leave their rail lines unfinished, or to ask state taxpayers to come up with budget busting amounts of cash to complete the projects.

Only a few years have passed and it appears that their fears were justified. The state of California bought the promise of federal dollars hook, line, and sinker only to see cost estimates rise and the will of Washington to fund the project dry up. Now the already broke California taxpayers are left holding the bag not only for the construction of the high speed rail system, but up to $373 million a year in operating subsidies.

These are only a couple of the countless examples of the federal government’s broken funding promises.

The percentage of state spending that comes from federal funds has risen from 26.3% to 34.1 percent% in just a two year period. However, with the federal debt skyrocketing to $16 trillion, huge cuts to state aid have already begun. In the 2013 fiscal year, states will receive $18.2 billion less in federal aid.

The potential for future federal cuts makes the situation even bleaker. In our home state of Wisconsin, where federal dollars constitute 29% of the budget, taxpayers face having to make up $350,000,000 in monthly federal support for Medicaid, $140,000,000 for law enforcement training and equipment for first responders, and $162,300 in Veterans’ monthly benefits. Yet we are simply expected to take it on blind faith that the federal government will live up to its promise to fully fund the expansion of Medicaid. What in recent history justifies that expectation?

Despite all of the evidence that the federal government will fail to keep their promise to fully fund the expansion of Medicaid, special interests are trying to convince the public that Wisconsin should take the money while it is on the table. They argue that if the money fails to materialize, or shrinks in the future, that states will simply be able to hit a magic reset button by removing the additional people that they have added to the Medicaid rolls. This argument is disingenuous at best. Anyone who pays even a modicum of attention to the news has seen how difficult it is to alter an entitlement once it is given. But, in the case of Medicaid it won’t only be the lack of political will that prevents Wisconsin from going back to the old formula. The federal government has made it perfectly clear by its actions that once a state changes their Medicaid eligibility that change is set in stone.

As we watch this Medicaid expansion battle unfold and the people who raise the caution flag about believing the federal government’s funding promises vilified, we can only hope that Wisconsin’s elected representatives choose not to ignore their history lessons. The expansion of Medicaid, as called for under the affordable care act, is destined to be a financial burden on the state for decades to come. Wisconsin politicians should not walk away from the federal government’s empty funding promises, they should sprint.


About Wisconsin Club for Growth
The Club for Growth is a national network of over 40,000 men and women, from all walks of life, who believe that prosperity and opportunity come through economic freedom. Wisconsin Club for Growth, Inc. is dedicated to informing, educating and rallying citizens of Wisconsin to embrace and enact policies that lead to sustained economic growth, limited government, and minimal taxation. Wisconsin Club for Growth can and will have an enormous impact on the direction of our state. Wisconsin Club for Growth believes that effective lobbying is done at all stages of the budget cycle, including when our leaders make public promises and can be encouraged to support policies that spur economic growth. Wisconsin Club for Growth believes we must support pro-growth policies and encourage public officials with backbones to remain truly committed to making our economy and our state stronger. Wisconsin Club for Growth believes our leaders must stand up to the tax and spend mentality in Madison and work tirelessly to cut taxes and unleash the power of the free-market.

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