As Democrats negotiate President Bidens Build Back Better plan, the party faces two constraints of their own making. Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have vowed to keep the topline total new spending over the next ten years somewhere between $1.5 trillion and $2 trillion, and to have that new spending fully paid for. That puts much of the legislation in the hands of the Congressional Budget Office (CBO), which effectively decides how much programs cost and how much revenue other policies raise.
When it comes to the health care of some four million Americans, the CBO is not some neutral scorekeeper, but a political force whose predictions are self-fulfilling. By predicting that Republicans in conservative states will be intractably opposed to helping people get health insurance, the CBO has dramatically increased the chances that they continue to be intractable.
Normally, the way the CBO makes a projection is relatively straightforward, even if its not always accurate. Deciding how many people will use a tax credit is a matter of applying some social research, models, and basic math. However, when it comes to filling the Medicaid gap in the 12 states that refuse to expand Medicaid, what the CBO is doing is entirely different, and entirely political.
According to a new report, the CBO claims Democrats plan to fill the Medicaid gap, by allowing eligible low-income Americans in those 12 states to get free coverage on the Obamacare insurance exchanges or access a federal public option giving Medicaid-like coverage, would cost roughly $323 billion. But Democratsincluding many members still in Congressalready approved and fully paid for Medicaid for every low-income American. This is what much of the 2010 fight over the Affordable Care Act was about.
Democrats metaphorically shed a lot of blood, sweat, and tears, and not metaphorically shed a bunch of seats in Congress, making sure the ACA was paid for, and that Medicaid would be expanded in all 50 states. In 2010, the CBO assumed that every low-income adult in America would have access to Medicaid in 2021, and that it was paid for.
At this point, the CBO stopped making policy and economic predictions and instead decided to start making political predictions.
This didnt even really change after the Supreme Court in 2012 made the ACAs Medicaid expansion optional, since taking part in the expansion was still the logical thing for states to do from a financial perspective. The federal government picks up 90 percent of the cost of Medicaid expansion, making it a net-positive, no-brainer decision under effectively any analysis.
Only after numerous conservative Republicans in red states decided to oppose the Medicaid expansion on ideological grounds did the CBO change its baseline assumptions about how many people would have access to Medicaid and how much Medicaid expansion would cost. At this point, the CBO stopped making policy and economic predictions and instead decided to start making political predictions about how stubborn Republican refusal would be, and how well Democrats would do in future state elections.
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The current CBO political prediction is that if nothing changes, only a few holdout states will adopt Medicaid expansion before 2031. This makes the Democrats plan cost hundreds of billions more. This is the policy equivalent of quantum physics, where it is impossible to measure a subatomic particle without changing it. You cant make political predictions without rewarding political action.
Conservative Republicans in red states opposed Medicaid expansion to make universal health care harder to realize. By the CBO assuming most will continue to hold out for another decade, the CBO is in effect rewarding them and encouraging them to hold out. Thats because their intransigence makes universal health care more expensive, according to the budget scorekeepers.
Some of the non-expansion states are swing states like Wisconsin, Texas, North Carolina, and Florida, where Democrats either have or plausibly could take over the governors mansion. Local Republicans who might have wavered on this Medicaid issue to keep their political advantage would likely be strongly encouraged to keep holding out for years more if they see their efforts as effectively undermining Bidens agenda. By assuming Democrats will continue to lose elections at the local level, the CBO makes it harder for Democrats in Congress to pass the Biden agenda, therefore making it more likely Democrats will lose at the state level.
Democrats metaphorically shed a lot of blood, sweat, and tears, and not metaphorically shed a bunch of seats in Congress, making sure the ACA was paid for.
By that same token, if the CBO assumed state Republicans were likely to soon accept Medicaid expansion, therefore allowing Democrats to close the Medicaid gap without it costing anything, state Republicans would lose a major reason for continuing to hold out and would be more likely to fold.
If the CBO projected all states would do the financially logical thing and accept Medicaid expansion, the cost of the Build Back Better plan would be about $300 billion cheaper. The price of the federal government covering the remaining states 10 percent share would be minor, and offset by savings from moving some low-income people off subsidized exchange plans. Instead, the CBO tries to be more accurate by making political guesses. But this has made them a political player and their decisions a self-fulfilling prophecy. The CBO has picked a winner in the fight, and it is the GOP.
Democrats face what should be an easy choice. The first option is to take this $323 billion CBO score at face value. As a result, they will need to either drop their plan to get health insurance for some of the poorest Americans, cut some other popular programs from the Build Back Better agenda, or raise significant new taxes. It has become increasingly difficult to get the whole party to agree to these kinds of ideas. This would reward state Republicans who denied health insurance to poor people for years just to undermine the Democratic Party, and prove that the most conservative members of the GOP were smart for adopting this tactic. This move will also strongly encourage future Republicans to find similar ways to sabotage other programs to make them harder to fix in the future. For example, Build Back Betters universal pre-K program is designed as a state-federal partnership thats not even as generous as the Medicaid expansion. Local Republicans could similarly reject it for political reasons.
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Option two for Democrats is to say they feel no need to pay for something they already paid for ten years ago, and ignore this particular CBO score. This would seem to be a simple choice, but so far it has only been championed by Sen. Tammy Baldwin (D-WI), who comes from a non-expansion state.
We will soon find out if the Democratic Party is going to encourage state Republicans effort to undermine everything they do.