Recession Stirs Advocates for a Fully-Nationalized Medicaid

Last week, we wrote about the budget troubles facing states in this sputtering economy, with nearly half of them already proposing or enacting cuts to Medicaid. The reason is clear: 49 states have some form of legal balanced-budget requirement, and Medicaid, which is paid with a combination of state and federal funds, eats an enormous chunk of annual state revenues. (The ratio varies by state, but on average, Washington pays about 57 percent of Medicaid costs, and the states pick up the remainder.)

Combined, these factors force states to cut services to their neediest residents during a time when the need is greatest. The perversity of that equation hasn’t been lost on Paul Krugman, the Nobel Prize-winning economist, who uses his column in The New York Times today to push for a Medicaid program funded solely by the federal government, which can borrow money in a recession to meet the budget challenges when more and more people become Medicaid-eligible. From the column:

[S]hredding the social safety net at a moment when many more Americans need help isn’t just cruel. It adds to the sense of insecurity that is one important factor driving the economy down. [...]

As a nation, we don’t believe that our fellow citizens should go without essential health care. Why, then, does a large share of funding for Medicaid come from state governments, which are forced to cut the program precisely when it’s needed most?

This is hardly a change of heart for Krugman, who has long-advocated for the creation of a nationalized health care system. But reforms of such magnitude don’t happen in times of non-crisis (Just ask the Clintons). Whether the current recession will force Washington policymakers to consider some reworking of Medicaid’s funding mechanism has yet to be seen. But you can bet that roughly 50 state governors would be behind such a change.