Will "Obamacare" ruin NH's budget?

The following is an editorial written by John Stephen, former commissioner of Health and Human Services. Please leave a comment and let us know what you think.

"Obamacare will blow a giant hole in NH's budget"

In the national discussion of health care reform, one critical area has been left out: the devastating repercussions the legislation being considered in Washington would have on state budgets across the country. For New Hampshire, this massive unfunded federal mandate could lead the state to an income or sales tax.

Enclosed in the legislation are several ticking fiscal time bombs that threaten to blow major holes in our budgets over the next few years. Each of these provisions would put stress on any state's budget, but the cumulative effect of all could sink individuals and businesses with higher state taxes at a time when we will need strong growth coming out of the recession.

A cursory estimate shows how great the financial implications would be. The Granite State could easily be looking at a $1 billion impact over the next decade in increased state spending and lost revenues. That already sounds bad, but the real danger is back-loaded, with roughly $700 million of the damage being done in the last four years.

State revenues would be needed to make up this money, and with a hole that massive, it could require a broad-based tax that would destroy the New Hampshire Advantage.

Where does this new spending originate? A large part is a massive expansion of Medicaid. The bills before Congress would swell the Medicaid rolls by 11 million nationally, according to the Congressional Budget Office. A good portion comes from getting people who are already eligible for Medicaid signed up for government health care.

How big is the issue? In 2007, 142,000 New Hampshire residents were uninsured, according to the Kaiser Family Foundation. National estimates suggest that between one-quarter and one-third of uninsured individuals are currently eligible for Medicaid. That means that there is a pool of 35,000 to 47,000 people in New Hampshire who could go on Medicaid tomorrow.

Two provisions in the legislation would mandate that states move heaven and earth to find these uninsured and get them on Medicaid starting in June 2010. However, there is no added federal funding for the state share of these costs. This would result in a budget hole of tens of millions of dollars each year.

Another part of the bill expands Medicaid coverage to able-bodied, childless adults for the first time in New Hampshire history. Here, the feds agree to pick up the costs for these new enrollees until 2014. But then the trouble begins. After that point, the state would have to eat from 10 to 50 percent of the future costs, depending on which version of the House or Senate bills passes. This creates another major hole in the state budget.

A third provision would dismantle the state's Disproportionate Share Hospital Program, starting in 2016. To put this in perspective, the state expects $214 million from this program in the current budget. Taking this away wouldn't be just a cut, but a hemorrhage.

However, the most pernicious component is one that ties the hands of states to manage their own budgets. A mandate in the legislation would restrict states from making any reductions to Medicaid eligibility and benefits in the future. Given that Medicaid is the largest expenditure in state budgets nationally, this restriction would substantially impair states' ability to reduce Medicaid expenses in lean years. Ultimately, with fewer opportunities to lower spending, this means higher taxes in bad economic times, a recipe for disaster that will prolong recessions.

Our governor and state legislators need to make clear to members of Congress that we will not stand for trying to hide the cost of health care reform by putting it on the backs of state taxpayers. Tennessee Gov. Phil Bredesen called it right when he said that these proposals amount to "the mother of all unfunded mandates." Are we forgetting the special education unfunded mandates we are still dealing with? We simply cannot add the devastating impact of these unfunded mandates that will forever alter the New Hampshire Advantage as we know it.

Americans deserve a vibrant, robust and competitive health care system that puts patients and quality first, not a boondoggle that shifts the costs from federal taxpayers to state taxpayers. Let's scrap this jumbled mess and start from scratch.

John Stephen of Manchester is a health care consultant. He served as New Hampshire's commissioner of health and human services from 2003 to 2007.