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Business Observer Friday, Mar. 1, 2013 7 years ago

The Economics of Blackmail

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For all those Tea Partyers chafing over Gov. Rick Scott's switcheroo to accept Obamacare's expansion of Medicaid spending in the state, sometimes you just have to take ipecac.
by: Matt Walsh Editor

For all those Tea Partyers chafing over Gov. Rick Scott's switcheroo to accept Obamacare's expansion of Medicaid spending in the state, sometimes you just have to take ipecac.

Look at it this way: Either this or another term or two of Charlie Crist in the governor's mansion.

Pick your poison.

The real fact of the matter is this: Politics, yes, perhaps. But the decision was and is economic. If the Legislature rejects the Medicaid expansion, it will be an economic calamity for the state. Just ask the CEO of any Florida hospital.

What's more, when you do the analysis, Obamacare is prima facie evidence No. 1 of how the constant expansion of the federal government eviscerates state's rights and ultimately eviscerates your individual freedom. Another way to put this is it's federal blackmail.

You should read all of Scott's remarks for full context. You likely didn't see them in any of the daily press. They gave you the soundbites and screamed over and over again that the man who ran a national campaign against Obamacare flip flopped and teed off his base. Gotcha! they gloated.

But when you read his entire remarks, you can see the dilemma he and every other governor who hates Obamacare faces. (Find the entire text here.)

As Gov. Scott stated in his Feb. 20 remarks: “... There are no perfect options ... Our options are either having Floridians pay to fund this program in other states while denying health care to our citizens, or using federal funding to help some of the poorest in our state with the Medicaid program as we explore other health care reforms.”

It's much deeper than that. There are big dollars involved that affect Florida's economy — an economy whose three-legged stool could now be called tourism, health care and real estate.

Consider that of Florida's 18.8 million population, 35% of that, or 6.66 million Floridians, fall into the age categories where heathcare is almost a daily part of life — under 5 and 55 and over.

Now let's break down those numbers even more:
• Florida's eligible Medicare recipients: 3.5 million people, 19% of the population.
• Florida's Medicaid caseloads: 3.2 million people, 17% of the population.

Think of all of the medical providers who touch those people.

Now consider this: To be able to expand Medicaid, Obamacare is going to take back over 10 years $700 billion out of Medicare, with $155 billion of that coming out of hospitals nationwide. That was money that was expected to reimburse hospitals and health care providers. But now, under Obamacare, that money will go to expand Medicaid.

So think of the effects of Scott and the Legislature rejecting an expanded Medicaid. It would create a double-negative economic whammy.

Not only would Florida hospitals, doctors and everyone else serving Medicare patients lose reimbursements on Medicare, rejecting the Medicaid expansion also would cost Florida; the state would be unable to recoup some of the lost Medicare money — even though Florida taxpayers will be contributing to Obamacare all the while.

Take a look at the chart below. Sarasota Memorial Health care calculated what would happen to its business with and without the Medicaid expansion. Just on that hospital system alone, Sarasota Memorial estimates it's going to lose revenues because of Obamacare. But the losses over 10 years would be 32% greater without expanding Medicaid — $178 million versus $122 million.

Now multiply those kinds of losses by 209 hospitals, the number of hospitals in Florida.

You can imagine the negative economic effects: fewer jobs, doctor shortages (we already have that) and all of the attendant trickle down effects to health care suppliers, local restaurants, dry cleaners, groceries, home builders, car dealers, etc.

Indeed, in a study commissioned by the Florida Hospital Association and shared with Scott and legislators, two researchers at the University of Florida ran economic models estimating the economic impact of expanding Medicaid. While we're always suspect of these models, the report nonetheless provides an eye-opening snapshot of what can be expected over a 10-year period in Florida:

Mind you, while the above table shows huge amounts of money and jobs that will flow into Florida's economy and be spent on health care and the attendant multipliers, this is not new-found money. It's money being taken out of someone else's pocket (yours included) and being transferred as an unearned entitlement and benefit.

Indeed, it's Frederic Bastiat's broken window. When a boy throws a rock through a store owner's window, some people will say: “Great, now the window maker and sign maker will be able to stay in business.” What they forget is the store owner who must replace that window may have been saving that window money to buy himself a new suit and shoes. The suit and shoe makers are the losers.

So for every job Obama keeps going with entitlement transfer payments for Medicaid, the economy is deprived of another job.

Sure, expanding Medicaid can be argued as a gain to Florida's economy. Likewise, there will be the Obama-ites who will argue that if we don't expand Medicaid to Florida's uninsured, those who have insurance will continue to pay higher insurance and medical costs to pay for the uninsured's use of health care resources. This is what is happening now, with hospitals pushing their charity-care costs on to insured, paying customers.

How to deal with the vast numbers of uninsured is worth another column or a book. That's a deeper topic that starts with the concept of personal responsibility and the effects of the perception that health care is not a limited resource and that we are all entitled to the best health care available.
In Gov. Scott's remarks, he recalls the agony of his mother who couldn't afford medical care for an ill brother. Scott says no one in this great country should have to worry about that.

Agreed. But he also knows, as he stated, government-run health care is not the best answer.

But Scott and the nation's other 49 governors and 49 legislatures are living first-hand the calamity that has come from the ever-expanding federal state. They have lost their sovereignty, the independence of each state as envisioned by the Founding Fathers in the Constitution. Through federal bribery and blackmail, Americans have become shackled to the Federal State — and over the next 10 years, $6.2 trillion more in federal debt!

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