HEALTHCARE RAISES TAXES

By Dick Morris on December 1, 2009

Published on TheHill.com on December 1, 2009

The Obama healthcare initiative will be the biggest unfunded federal mandate on the states in history. It will force dozens of states, particularly in the South, to abandon their low-tax ways and to move toward dramatically higher rates of taxation. It may even force Florida and Texas to impose an income tax!

In the Senate version of the bill, states must expand their Medicaid eligibility to cover everyone with an income that is 133 percent of the poverty level.

The House bill brings it up to 150 percent. But a host of states have kept their state taxes low precisely by so limiting eligibility for Medicaid that it essentially is only for seniors needing long-term care and not for poor younger people who require acute care.

For example, Texas covers only those who make 27 percent of the poverty level or less. Florida covers only 55 percent. Pennsylvania covers only 36 percent. Arkansas covers only 17 percent. North Dakota covers only 62 percent. Nebraska covers only 58 percent. Louisiana covers only 26 percent. Indiana covers only 26 percent.

The revenue required to bring these states up to the 133 percent level in the Senate bill or the 150 percent level in the House would be enormous. Even California only covers up to 106 percent of the poverty level.

All states except for Connecticut, Illinois, Maine, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Tennessee, Vermont and Wisconsin (plus the District of Columbia) will have to raise their eligibility for Medicaid under the Senate healthcare bill. And they will have to pay for part of the cost. Under the House bill, with a higher Medicaid eligibility standard, Massachusetts and Vermont would also have to pay more.

The Medicaid expansion provisions of the Senate bill are complex. In the first year of the program (2013), states must enroll anyone who earns less than 133 percent of the poverty level in their programs. For a family of four, the national average poverty level in 2009 is $22,000 a year. So any family that size that makes less than $29,000 would be eligible for Medicaid.

For the first three years of the program (2013-2015) the federal government would pay for all of the costs of the Medicaid expansion. But starting in the fourth year of operation — 2016 — states would be obliged to pay 10 percent of the extra cost.

While Obama has often spoken about how he won’t raise taxes on the middle class, his healthcare legislation will require the governors to do so.

Particularly in those states with Democratic governors, it is easy to see how the backlash against these new taxes could fundamentally alter state politics.

The following table is a rough calculation of the cost each state will have to bear once it has to pick up 10 percent of the cost. These calculations are based on guidelines laid down for me by the Republican staff of the Senate Finance Committee. There has been no official data yet generated on how much the Senate or House provisions will cost the taxpayers in each state.

STATE SPENDING INCREASES IN MEDICAID REQUIRED BY SENATE HEALTH BILL

Alaska $39M Mont. $29M
Ariz. $217M Neb. $81M
Ark. $402M Nev. $54M
Calif. $1,428M N.H. $59M
Colo. $163M N.M. $102M
Del. $35M N.C. $599M
Fla. $909M N.D. $14M
Ga. $495M Ohio $399M
Hawaii $41M Okla. $190M
Idaho $97M Ore. $231M
Iowa $77M Pa. $1,490M
Ind. $586M S.C. $122M
Kan. $186M S.D. $33M
Ky. $199M Texas $2,749M
La. $432M Utah $58M
Md. $194M Va. $601M
Mich. $570M Wash. $311M
Miss. $136M W.Va. $132M

Mo. $836M

Wyo. $25M

These estimates were obtained by calculating the increase in Medicaid spending in each state to bring it up to the 133 percent level specified in the Senate bill. Then I applied the percentage of Medicaid spending in each state on acute care (mainly for the poor) as opposed to long-term care (mainly for the elderly). Finally, I took 10 percent of the increased state share of spending and listed it in the table above.

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Please leave a comment below - I would love to hear what you think! Thanks, Dick
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