Moral Tradeoffs and Medicaid Expansion

-- Posted by Neil H. Buchanan

Five weeks ago, as Republican politicians and Fox News talking heads anticipated the Supreme Court's health care decision, not one of them was raging about the Medicaid expansion. As I point out in my new Verdict column today, however, the new religion on the Right involves the fervent belief that the expansion of Medicaid coverage to millions of poor and near-poor Americans will be the ruination of the state and federal governments. One has to give them credit for a unique kind of "anger management": They have great agility in turning, in a group pirouette, from obsessively screaming about one topic for months to becoming outraged by another topic, in a matter of moments.

Although I briefly mention the cynicism of all of this as a political matter, the bulk of my Verdict column is dedicated to explaining why conservative governors are wrong, on the merits, to oppose the expansion of Medicaid. Even though seven Justices of the Supreme Court inexplicably gave states the option to refuse to expand their Medicaid programs (under an astonishingly generous financing system that Congress provided), whether they should opt in is an easy call. Every state should do it. Thirty Republican governors have, of course, said that they see it otherwise.

The arguments against opting in amount to a familiar two-step: (1) Even though it will cost the states very, very little to join the new system, they still cannot afford to do so, because they just do not have the money, and (2) As a broader policy matter, shifting the cost to the federal government is bad, for the usual litany of reasons that these politicians always use to vilify federal spending. The last of these, of course, is "stealing from our children and grandchildren."

I will leave it to interested readers to go to my column to read my responses to both points. Here, I will discuss (again) the moral principles that are in play when we talk about intergenerational justice, in this case with regard to providing health care to our most needy citizens.

It is important to specify up front that much of the analysis to follow will assume as correct many orthodox economic arguments that are almost surely wrong. As I have discussed several times here on Dorf on Law (e.g., here), using "arguendo reasoning" carries with it the high risk of seeming to endorse the premises of an argument, even if it is otherwise clear that the writer disagrees or is agnostic about those premises. Saying something like, "Even assuming that the Bible is true, gay marriage does not violate its message," especially if repeated over and over, starts to sound something like, "Gay marriage does not violate the Bible's true message." Inasmuch as one can warn against such slippage, I hereby do so.

In response to the "deficits cheat future generations" argument against the Medicaid expansion, I limit myself in my column to the standard "government spending as investment" response. The federal government is uniquely situated to borrow money (currently at essentially zero real rates) in order to invest in the health of its population. This, in turn, will show up in a more productive populace. This is standard economics -- and not even Keynesian economics, actually, because it has nothing to do with demand management, but rather with finding ways to increase productivity to expand aggregate supply.

But what if that is wrong? That is, let us assume arguendo that there is no investment payoff to the economy and society from improving the health of several million of the least fortunate Americans? Suppose, in other words, that we spend money on giving them medical care, and that they personally benefit, but those benefits do not spill over to the rest of us in the form of greater productivity?

If that were true -- and again, it is not -- what would the moral calculus look like? The standard Republican (and Clintonian New Democrat) argument begins and ends with, "We're impoverishing future generations when the federal government borrows money." Not true, but what if they were right? What if future generations were really made less wealthy than they otherwise would be, because of the Medicaid expansion?

I will leave aside one prominent argument from my first law review article that discussed justice between generations, which is that even the most pessimistic projections show that economic income will rise smartly into the future. Assuming that away, also arguendo, we then confront the moral consequences of possibly making future generations less wealthy by expanding Medicaid, when the incomes of future generations are not double or quadruple current levels. Surely, making all of those assumptions would force us not to expand Medicaid, right?

Not only is that wrong, but it is still an easy call. First, consider the nature of the tradeoff that we are making. Expanding Medicaid will cost roughly $110 billion per year, on average, for the first decade. The standard economic concern regarding borrowed money is that it will "crowd out" private business investment, dollar for dollar. This would mean that there will be a reduction of $110 billion per year in investment, which is about 5% of overall investment in 2012, less than 1% of GDP. Even if the crowded-out investments had resulted in huge payoffs, we would still be talking about reducing future income growth (which, we hope, will return to the 3% annual range) by tenths or hundredths of one percent annually.

This is not a lot of money, when spread over the entire population. I will not show my work here, but under extremely generous back-of-the-envelope calculations, even a high number would be along the lines of $25-$50 per future person per year. (Again, this is all arguendo.)

And what do we get for that money? Continuing to assume away the benefits that a healthier population bestow upon all of us, we will have given millions of poor and near-poor people health care, every year, that they now do without. Everyone has their own cutoffs regarding how much "welfare" we as a society should be willing to provide, but the moral case for spending here -- better health for a vulnerable population now, in exchange for a few dollars a month from our grandkids, at worst -- is a pretty easy one to make.

Finally, consider what happens if we assume that the distribution of income growth in the United States continues to be as skewed as it has been since Ronald Reagan became President. We have, after all, seen a full generation's worth of economic growth go almost entirely into the pockets of the top 0.1 - 1% of the population. If that were to continue, the "future generations" who would supposedly be impoverished by federal spending are actually only the future heirs of the most fortunate Americans. Their per-person cost would be higher, but their ability to pay that cost would be much, much higher.

Medicaid is, therefore, one of the easiest cases to make for policies that are the nightmare of mindless fiscal conservatives: borrow now, to benefit people today, and leave the bill for future generations to pay. If my hypothetical children and grandchildren were to find themselves in the top of the income distribution, and they lost a tiny percentage of their incomes so that some people in 2012 should not die of preventable diseases, I think I could sleep well at night. And I hope that I would raise children who would understand that they have not been cheated.