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A Note from the Senate desk – 4.03.12

A Note from the Senate desk – 4.03.12

Posted: Wednesday, April 4, 2012 7:49 am
By: Sen. Lamar Alexander

During the debate two years ago over the health care law – which I called an historic mistake because it expanded a health care delivery system we already knew was too expensive, instead of taking steps to reduce its cost two years ago – I suggested to our colleagues on the other side of the aisle who were supporting it that, if they voted for it, they ought to be sentenced to go home and run for governor and see whether they could implement it over an eight-year period.
Governors have long wrestled with the rising costs of Medicaid, paid for partly by the states according to rules set in Washington, and the question of how to deal with public education, especially higher education. Some 30 years ago, when I was a young governor, I was still struggling with the fact that at the end of the budget process, we had money either to put into higher education or into Medicaid – but the rules from Washington said it had to go to Medicaid.
I remember going to see President Reagan and asking: ‘Why don’t we just swap it, Mr. President? Let the federal government take all of Medicaid. Let the states take elementary and secondary education.” That didn’t happen, and gradually, the increasing Washington-directed costs have distorted state budgets so much that now 24 percent of the state budgets go to the Medicaid program.
Because of the health care law, we are going to add 25.9 million more Americans to Medicaid, according to the Medicaid Chief Actuary.
Our former governor, Phil Bredesen, a Democratic governor, estimated that between 2014 and 2019 the expansion of Medicaid would add $1.1 billion in new costs to the state of Tennessee.
Most people do not realize the effect this will have on higher education. For one thing, the health care law is raising costs for students who borrow money to pay for school. Most people are not aware that the federal government borrows money at 2.8 percent and loans it to students at 6.8 percent – and it has taken $8.7 billion in those so-called profits and spent it to pay for the health care bill. If it did not do that, it could lower the interest rates on student loans, according to the Congressional Budget Office, to 5.3 percent and save the average student $2,200.
It also raises the price of tuition. Last year in Tennessee, the state’s Medicaid costs went up by 15.8 percent. Spending for the University of Tennessee and community colleges went down 15 percent. Then the result of that was tuition went up in our state by about 8 percent. That was true all across our country.
The health care law mandates that the states spend more money on Medicaid, and, as a result, the state cuts the money it is spending for the University of Tennessee. In order to keep the quality of education up, tuition has to go up. So students are paying more for tuition and they are paying more for interest rates on their student loans directly because of the health care law.
President Obama should not be blamed for the last 30 years of rising Medicaid costs, but he should be held responsible for making it worse.
And it’s not just the states that will suffer from the high cost of the new law. Businesses are already suffering, too.
After the health care law passed, I met with a number of representatives from chain restaurants, which are among the largest employers in America. Many of those companies offer some health insurance to their employees. The CEO of Ruby Tuesday, headquartered in Tennessee, told me the cost of the health care law to his company would equal the profit of the company that year. And this is a company with several billion dollars in revenue.
Another chain told me they had decreased its goal for “employees per restaurant” from 90 to 70 employees in order to comply with the cost of the health care law. This not only raises the cost of business, but it reduces employment in the United States.
Millions of Americans, because of the health care law, are going to lose their employer-sponsored insurance, and millions of Americans will not have as many jobs because of the costs imposed on businesses such as these restaurants. With all the consequences this bill will have on state budgets, higher education and the businesses we hope will grow, we need to start over with real insurance reforms that lower the cost of health insurance for all Americans.

WCP 4.03.12

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