The ObamaCare tax increase

| Thursday, Dec. 3, 2009

The Obama health care initiative will be the biggest unfunded federal mandate on the states in history. It will force dozens of states, particularly in the South, to abandon their low-tax ways and to move toward dramatically higher rates of taxation. It may even force Florida and Texas to impose an income tax!

In the Senate version of the bill, states must expand their Medicaid eligibility to cover everyone with an income that is 133 percent of the poverty level. The House bill brings it up to 150 percent. But a host of states have kept their state taxes low precisely by so limiting eligibility for Medicaid that it essentially is only for seniors needing long-term care and not for poor younger people who require acute care.

For example, Pennsylvania covers only those who make 36 percent of the poverty level or less. Texas covers only 27 percent; Florida, 55 percent; Arkansas, 17 percent; North Dakota, 62 percent; Nebraska, 58 percent; Louisiana, 26 percent; Indiana, 26 percent.

The revenue required to bring these states up to the 133 percent level in the Senate bill or the 150 percent level in the House would be enormous. Even California covers only up to 106 percent of the poverty level.

All states except for Connecticut, Illinois, Maine, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Tennessee, Vermont and Wisconsin (plus the District of Columbia) will have to raise their eligibility for Medicaid under the Senate health care bill. And they will have to pay for part of the cost. Under the House bill, with a higher Medicaid eligibility standard, Massachusetts and Vermont would also have to pay more.

The Medicaid expansion provisions of the Senate bill are complex. In the first year of the program (2013) states must enroll anyone who earns less than 133 percent of the poverty level in their programs. For a family of four, the national average poverty level in 2009 is $22,000 a year. So any family that size that makes less than $29,000 would be eligible for Medicaid.

For the first three years of the program (2013-2015), the federal government would pay for all of the costs of the Medicaid expansion. But starting in the fourth year of operation -- 2016 -- states would be obliged to pay 10 percent of the extra cost.

While Obama has often spoken about how he won't raise taxes on the middle class, his health care legislation will require the governors to do so. Particularly in those states with Democrat governors, it is easy to see how the backlash against these new taxes could fundamentally alter state politics.

The table below is a rough calculation of the cost each state will have to bear once it has to pick up 10 percent of the cost. These calculations are based on guidelines laid down for me by the Republican staff of the Senate Finance Committee. There has been no official data yet generated on how much the Senate or House provisions will cost the taxpayers in each state.

State spending increases in Medicaid (in millions of dollars) required by Senate health bill:

Alabama 394

Alaska 39

Arizona 217

Arkansas 402

California 1,428

Colorado 163

Delaware 35

Florida 909

Georgia 495

Hawaii 41

Idaho 97

Iowa 77

Indiana 586

Kansas 186

Kentucky 199

Louisiana 432

Maryland 194

Michigan 570

Mississippi 136

Missouri 836

Montana 29

Nebraska 81

Nevada 54

New Hampshire 59

New Mexico 102

North Carolina 599

North Dakota 14

Ohio 399

Oklahoma 190

Oregon 231

Pennsylvania 1,490

South Carolina 122

South Dakota 33

Texas 2,749

Utah 58

Virginia 601

Wash. State 311

Wyoming 25

West Virginia 132

These estimates were obtained by calculating the increase in Medicaid spending in each state to bring it up to the 133 percent level specified in the Senate bill. Then I applied the percentage of Medicaid spending in each state on acute care (mainly for the poor) as opposed to long-term care (mainly for the elderly). Finally, I took 10 percent of the increased state share of spending and listed it in the table above.

Dick Morris, a political columnist, was an adviser to the Clintons for 20 years.

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