States on hook for health-care tab

Forty-seven states are currently operating in the red. Fortunately, Montana is not one of them, but there are ominous clouds on the budget horizon that are being created by impending federal policies.

Gov. Brian Schweitzer has been admirably focused on fiscal responsibility since being first elected in 2004. He insisted, for instance, that the state have strong reserves, roughly $300 million, at the close of last year’s legislative session. It’s a good thing he did, because tax revenues have been coming in far short of projections, and the legislative fiscal division now expects the state’s reserves to shrink to just $17 million by June 2011.

The governor has rightly responded to the worsening outlook with a series of cost-saving measures, most recently suspending about $2 million in wildfire equipment purchases and fuel reduction projects this year. And he has ordered state agencies to prepare for 5 percent spending reductions.

But Schweitzer has been strangely silent about the direction Washington, D.C., is dragging Montana and most other states. There have long been costly federal mandates, but the health-care legislation now before Congress may be the last straw, thanks in particular to the prospect of greatly expanded Medicaid eligibility.

Estimates vary, but the Heritage Foundation contends that by making Medicaid available to adults with incomes at or below 133 percent of the poverty line, enrollment in the program would grow by as much as 80 percent in Montana, 82 percent in Nevada and 76 percent in Texas.

That simply translates into huge new financial burdens for states, regardless of whether the federal government decides to provide additional assistance in the future. This is why Sen. Ben Nelson of Nebraska secured the now infamous “Cornhusker Kickback,” an assurance in the Senate health bill that the federal government would cover his state’s future Medicaid cost increases.

For many states, those cost increases will come on top of Medicaid enrollments that have already been expanded due to last year’s federal stimulus bill. About $80 billion was offered to states for Medicaid programs, but the catch is that the money will vanish after 2011, with those states then having about 1 million more people in the program expecting benefits.

California Gov. Arnold Schwarzenegger, a Republican, was once a backer of the Democratic proposals for health-care reform, but the sobering realities of his state’s projected $6 billion deficit and future Medicaid cost increases have changed his tune.

“While I enthusiastically support health-care reform, it is not reform to push more costs onto states that are already struggling while other states get sweetheart deals,” he told a joint session of California’s legislature last week.

Gov. Schweitzer should be just as outspoken here, even if it goes against his own party’s agenda in Washington, D.C. He should do it for the sake of Montana’s fiscal future.