Medicaid-Rejecting Red States Making Themselves 2% Poorer: Live from the Roasterie XXI: October 29, 2013
Don Taylor: ACA: self imposed redistribution from poor to rich states:
At present, 24 States (and DC) have decided to move ahead with the Medicaid expansion provided for in Obamacare... 21 have rejected expansion... 6 are still considering their options. If the current decisions hold, it will result in a self-imposed redistribution of money from poorer (and typically Red states), to richer (and typically Blue ones). According to an analysis I [and Callie Gable] have done... in 2016... the 24 expanding states will receive $30.3 Billion... those not expanding will forego... $35.0 Billion... the fence sitters have... $15.2 Billion at stake....
The rejectors have 1/3 of the wealth of the nation--call it $5 trillion/year. They are throwing 0.7% of that away to make a political point. If this federal money was, say, to host an Air Force wing they would be begging for it. But since it is simply to help their poor afford to go to the doctor and make the lives of their medical professionals easier by not forcing them to play a shell game to raise the resources to treat the uninsured...
I am increasingly convinced that the Republicans of the Prairies and the South just do not understand how to play the game of economic growth or, indeed, of capitalism in the 21st century. Betting your economic growth strategy on low wages, a lack of infrastructure, low taxes, union-busting, natural resources, and the direction of farm subsidies, defense spending, and NASA to your districts carries you only so far, after all.
In the short-run of our currently-depressed economy we want to apply the within-monetary-union Keynesian multiplier to these flows: Medicaid-rejcting red states are thus making themselves 2% poorer in the short-run. For medical-care hubs like Dallas, Omaha, Atlanta, and Kansas City, the effects are likely to be larger: 3% less in terms of economic activity relative to the baseline, while the Bostons, the Denvers, and the Albuquerques will be on baseline. In the long-run--should they continue this insane and self-destructive policy--we want to apply Enrico Moretti's long-run regional economic distribution multipliers--which means that we are talking a fall relative to baseline growth of 6% of regional GDP as far as medical-hub cities are concerned.
Doctors of Overland Park, Kansas, and businessmen and -women of Kansas City, Dallas, Omaha, and Atlanta to the red courtesy phone, please...
Don Taylor:
In... 2000... states rejecting expansion received $1.36 in federal spending per tax dollar paid as compared to $1.10 for those undertaking expansion.... 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 (there are exceptions; red Kentucky is both expanding Medicaid and has one of the best functioning State exchanges). Further, those States that are expanding Medicaid have also tended to set up state-based insurance exchanges, which are currently operating much better than the federal one, meaning that income based subsidies associated with the purchase of private health insurance may flow less freely to poorer states.... And there is a court case that could stop the flow of such subsidies to states not operating their own exchange all together.... 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...
