The Medicaid Crisis That Shouldn’t Exist

By Ryan Mathis @rmathis995
Copy-edited by Jeff Epstein @CitizensMediaTV

CORRECTION 6/10/19: An earlier version of this article claimed that Bernie Sanders’ Medicare For All plan is akin to “the complete nationalization of the healthcare industry.” Medicare For All would in fact mean the nationalization of the healthcare payments system only. See, e.g., this analysis from the Levy Institute.

According to the National Bureau of Economic Research (NBER), the current economic expansion will become the longest expansion on record next month. Through 2018 and the first half of 2019, as growth has continued onward, the economics press has begun wondering if we are due for a slowdown. After all, the average expansion in the post-War period (excluding this one) is 58 months, just over half as long as this one.

What goes up must come down, so the argument goes. A regression to the mean is inevitable, so the logic says. This author will not opine on the likelihood of the expansion continuing or coming to a halt. Instead, I’d like to draw your attention to a tangential concern from the healthcare press: this recent piece from Vox. In it, the author asks a state finance expert from Pew Research the titular question – “Can Medicaid handle another recession?”

Now, a bit of background is required. Why would a recession be something Medicaid “can’t handle”? To answer, we need to know what Medicaid is. Presently, Medicaid is a healthcare program, administered at the state level, for low-income residents. State governments decide what income level qualifies a person for Medicaid in their state, what benefits are available to recipients, and so on. States also play a major role in financing their Medicaid programs, though the federal government also appropriates money for Medicaid.

For readers even casually familiar with Modern Monetary Theory (MMT), alarm bells should be ringing at this point. The United States is monetarily sovereign, so while it can run out of real, tangible stuff, its federal government can never “run out of money.” The federal government could simply make the political, not economic, decision to provide national healthcare for all. Then the dollars required to pay for everyone’s care would be created the way they always are: from thin air. Nobody’s taxes are used to “pay for” the new spending. Only a computer, electricity, and Internet access is required.

Now, states within the United States, on the other hand, do not have this capacity. California, Texas, and New York do not issue their own California Dollars, Texas Dollars, and New York Dollars. Just like you and me, states use the currency. As such, they very much can run out of money! Tax revenue very much is required for Florida or Ohio to spend. And it is precisely this fact that concerns health policy and state finance experts with regard to Medicaid.

With that in mind, consider the dynamics of an economic slowdown on state finances. In a recession, people lose their jobs. When, say, 50,000 people are laid off, that is 50,000 new people who qualify for Medicaid. It is also 50,000 fewer contributors to Medicaid. This combination can (and almost did in 2008, save for a stimulus package) destroy state budgets. Medicaid programs were put under severe pressure after the financial crisis, and that pressure has not significantly lessened, despite the long expansion.

The upshot is that, because they are currency users, state government finances are vulnerable to the ravages of an economic downturn. On top of this, because the federal government is solidly in the grip of reactionary Republicans and neoliberal Democrats, both of whom are beholden to the financial interests of their donors, it is a dangerous time for the nearly 75 million Americans reliant on Medicaid for basic healthcare services. The Obama administration and its congressional Democratic majorities did not meaningfully improve the situation for Medicaid recipients when they had the chance. How much confidence do we have in this group of politicians to respond effectively to a recession?

There is, of course, an obvious solution. Not just to Medicaid’s woes, but to the entire dysfunctional American healthcare system, as I have written about previously. That solution is the complete nationalization of the healthcare industry – that is, the private, for-profit healthcare industry – colloquially referred to as “Medicare For All.”

First and most obviously, a transition to a single-payer model, like that envisioned by Bernie Sanders’ Medicare For All bill, would immediately end the “my state can’t afford to pay for healthcare” problem. It would be federally funded and administered, meaning an end to the discrimination in quality of care between states like California and Alabama. It would also mean a recognition of healthcare as a human right in the United States of America, long an objective of the progressive left.

Furthermore, Medicare For All would be “automatic” in two important ways. First, recipients would not have to sign up as they do now for Medicaid, which is often prohibitively difficult, confusing, and lengthy ordeal. Instead, enrollment would be inherent in the simple fact of being American; there would be no “means-testing” required. And second, the hand-wringing over the financing of Medicaid that exists today would go away. The federal government can simply appropriate whatever amount of money is deemed necessary for universal Medicare coverage, freeing state governments to focus their attention elsewhere. For this most essential of services, although we can run out of doctors and hospital beds, it is impossible for the federal government to run out of money.

The transition from state funding to federal funding of healthcare is particularly important given who Medicaid helps: low-income people, disproportionately people of color, young children, and people with disabilities. In short, the most vulnerable members of American society rely, for their basic health needs, on a program that is, itself, dangerously vulnerable to an economic slowdown.

Clearly, this situation cannot persist. The United States of America has no shortage of national disgraces, and its healthcare system is among our most profound. We must federally fund healthcare for all Americans, unconditionally. Our healthcare should not depend upon the always-fluctuating strength of the economy, our individual employment status, or the particular finances of the state in which we reside. Healthcare is too important, too inalienable a right, too fundamental to human liberation, to provision on a conditional basis.

Fortunately, MMT proves to us that any policy for which we have the resources is always financially “affordable.” Medicare for All is clearly affordable, no matter what the health industry might say. Bernie Sanders’ presidential election bid, with his strong push for Medicare For All, offers us hope. But only with a transformative shift in the public’s understanding of federal finance can we effectively demand it.

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