Should Washington give the states money for healthcare?

This commentary originally appeared in The Washington Examiner on January 2, 2017.

Suppose that the Trump administration makes good on its promise to repeal Obamacare. Suppose further that Dr. Tom Price, new secretary of the Department of Health and Human Services, decides to let the states decide how to provide healthcare to their residents.

The rationale behind turning healthcare over to the states is straightforward. (A) Based on the Constitution's silence regarding healthcare and the Tenth Amendment, the states are responsible for the health of their people: Providing healthcare is not the federal government's job. (B) Medicaid law clearly specifies that the programs are supposed to be "state administered" (quote from original 1965 law), not controlled by Washington.

If the states are responsible and in control, should the federal government give the states any federal dollars for healthcare? The answer is no and yes.

The federal government collects tax revenue in order to pay for services that the federal government is tasked to provide, things that individuals cannot do for themselves such as military defense, securing the borders, international trade and interstate commerce.

Some might cite the Golden Rule: He who has the gold makes the rules. In other words, if Washington has the money, then Washington should be in control. The fallacy is this—it's not Washington's money! Washington's money is generated by state residents and corporations. Washington merely collects it through taxation. Washington doesn't produce anything other than advisories, guidelines, rules and regulations. These, in turn, require hiring (you pay them) actuaries, administrators, bureaucrats, compliance officers, lawyers, navigators, oversight and review agents, regulators and rule writers.

Because healthcare is not a federal responsibility, Washington does not need tax revenue to pay for it. Therefore, Washington should reduce federal taxation by the amount currently being spent on the healthcare system. Since Washington spends more than $3 trillion dollars per year, giving healthcare back to the states, in theory the federal government could reduce the federal tax burden of the average American by $9,375 per year (3 trillion divided by 320 million).

While the Constitution does not give healthcare responsibility to the federal government, since 1787 Washington has voluntarily taken on three healthcare responsibilities: Medicare, a self-funded program; Medicaid, a "jointly funded" program, and the Emergency Medical Treatment and Labor Act (EMTALA), an unfunded mandate. Medicare is your money that the government returns to you. If Washington restores Medicaid control to the states and reduces the tax burden correspondingly, then there is no need for Washington to pay the states for their Medicaid programs.

So far, the answer to the title question is "no." But then, there is the unfunded mandate.

In 1986 Congress passed EMTALA. This law requires any hospital receiving federal support in any form to provide urgent or emergent care to a sick person regardless of whether the patient can pay, has insurance, or there is no source of payment at all for the hospital's expenses. This is called the unfunded mandate.

It is only reasonable that if Washington passes a law that requires a large outlay of dollars by the states, Washington should pay that outlay. Even Washington agrees in theory, which is why Congress passed UMRA in 1995, the Unfunded Mandate Reform Act. However, despite its name, UMRA did not fund the unfunded mandate. Therefore, federally required (mandated) but uncompensated care remains a large obligatory financial loss for Texas hospitals and providers.

For a sense of magnitude, hospitals in the Lone Star State reported $11.6 billion in uncompensated care charges in 2006. While there are some sources to cover part of these costs, several billion dollars per year remain unreimbursed. Unless hospitals "find" that money, usually by over-charging insured patients, hospitals will quickly go out of business.

The federal government should fund the unfunded mandate built into EMTALA. This means paying the states for the cost of federally mandated but uncompensated care. An alternative would be to repeal EMTALA and thus eliminate the unfunded mandate. This is a political nonstarter.

The solution to Texas' sick healthcare system starts with two basic principles: states' rights and personal responsibility. The first tasks the states and not the federal government with provision of healthcare. The "person" in this personal responsibility is the federal government. If they mandate an expense, they are responsible to pay for it.