The Great Medicaid Transfer From Red States to Blue States

Don Taylor takes a quick look at how much money red states are giving up by refusing to participate in Obamacare’s Medicaid expansion:

According to an analysis I have done using Kaiser Family Foundation data—in 2016 alone—the 24 expanding states will receive $30.3 Billion additional federal dollars, while those not expanding will forego an additional $35.0 Billion they could have had.

….States that are not expanding Medicaid have historically received more in federal spending per dollar of federal taxes paid by the state ($2.18) as compared to States that are expanding ($1.85)….While the Medicaid program is not the only means through which richer states have cross subsidized poorer ones, it has been a large and consistent source of such flows. By choosing not to expand Medicaid, the poorer, mostly politically “red” states are redistributing money toward the richer, mostly politically “blue” ones.

….The bottom line is that if the current State Medicaid expansion decisions persist, the unintended story of the ACA will turn out to be the redistribution of money from poorer States, to richer ones, an outcome imposed by the poorer states, upon themselves. I will write more about what I think this means for the future of health reform over the next few days.

I think it’s still an open question how this is going to turn out. No matter how, um, passionate the tea partiers are about Obamacare, at some point it’s going to be clear that it’s here to stay. Maybe that’s a year from now, maybe it’s two. And when that finally happens, the scorched-earth opposition is going to deflate and all those red states are going to start taking another look at all the money they’ve given up. It may take a while, but I suspect that within a few years virtually every state will finally decide that there’s not much point in continuing to hold out. One by one, they’ll all belly up to the bar and sign up.

Who knows? Given what’s happening in Mississippi right now, maybe we’ll see a change of heart in the Magnolia State sooner than we think. Maybe.

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