- Expanding the state’s Medicaid program is not “free” to NC taxpayers.
- In addition to the direct costs of expansion, we must also account for the opportunity cost.
- Growing entitlement spending threatens all other state expenditures – including funding for public education.
The May 2019 Civitas Poll found that 71 percent of respondents had heard of the May 1 teacher rally, and 54 percent approved of school districts missing a day of school for the event.
Many North Carolinians probably voice support for the rally as a proxy for their support of public education more broadly. However, the rally was actually often less about teachers and students than it was about advancing the far-left policy agenda of the rally organizers, the North Carolina Association of Educators (NCAE).
One of the NCAE’s top policy priorities was the expansion of the state’s Medicaid program. But, in fact, Medicaid expansion would not extend Medicaid eligibility to any new K-12 students. And teachers, as state employees, already have private insurance through the State Health Plan as part of their compensation package.
Of those who would be newly eligible under expansion, 78 percent would be working age, able-bodied, childless adults.
John Locke Foundation scholar Terry Stoops highlighted the costs of the NCAE’s policy priorities in a recent post. If all their policies were implemented, Stoops found it would cost the state upwards of $6 billion for the first two years.
A Democrat Medicaid expansion proposal from 2017 was estimated to cost the state $335 million per year. As highlighted in Stoops’ piece, more recent estimates from the state’s Fiscal Research Division place that number at $430 million. Remember, Medicaid expansion has cost more than projected in nearly every state that has expanded the program.
Medicaid proponents have claimed that expansion would be cost-neutral because an additional tax would be levied on hospitals to pay for it. This is a nonsensical claim when you consider that all state spending comes from tax revenue; by this logic, you could claim that any new spending is “cost neutral” if it has a tax increase included to pay for it. The costs from the hospital assessments would almost certainly be passed on to patients.
But the federal government is unlikely to allow these shell games to continue for much longer. Former Vice President Joe Biden called the hospital taxes a “scam” and called for the ending of the practice in 2011.
Even with the assessment, it is ultimately state taxpayers on the hook for meeting the financial obligation of expansion.
Medicaid is an entitlement program, meaning it must take priority in the state’s budget before any other spending can occur. Paying the Medicaid bill comes before funding public safety, and – you guessed it – public education. Expanding Medicaid beyond its traditional recipient population means that funding for the health insurance of those who are capable of work would be prioritized over all other government services.
Thus, the true cost of expansion is both the dollars that we spend towards the program, but also what we give up in order to fund it. This is known as opportunity cost.
Including the opportunity cost of Medicaid expansion, as it relates to public education funding, puts the question of whether or not to expand Medicaid into perspective. The more conservative estimate of $335 million is the equivalent of the state share of education funding for the 25 smallest school districts in North Carolina combined (see table below). The revised estimate of $430 million equates to the state’s share of funding for the 31 smallest school districts.
So, which school districts does the NCAE want the state to de-fund in order to finance Medicaid expansion for mostly working-age, able-bodied, childless adults? Although this is a rhetorical question, it is posed to shed light on the opportunity costs of expansion. Growing government is never “free,” and Medicaid expansion proponents such as the NCAE should be aware of the costs associated with growing entitlement programs.
