TN Governor Finds Way To Flip Table On Feds

TN Governor Finds Way To Flip Table On Feds

by Peter Fotos
on October 28, 2010

I realize that I’m a little late in commenting on this story, but it seems like no one is talking about it. In last week’s Wall Street Journal, Tennessee Gov. Philip Bredesen submitted a shocking analysis of Obamacare by giving an example of how employers can and will drop coverage for their employees.

Amazingly, Gov. Bredesen notes that Tennessee could drop coverage for its state employees, pay the $2,000 per employee tax to the federal government, give their workers cash raises to compensate for the loss in health benefits, and still come out at least $146 million per year ahead. He writes:

With our current plan, they [state employees] contribute 20% of the total cost of their health insurance, and that contribution in 2014 will total about $86 million. If all these employees now buy their insurance through an exchange, that personal share will increase by another $38 million. We’ll adjust our employees’ compensation in some rough fashion so that no employee is paying more for insurance as a result of our action. Taking into account the new taxes that would be incurred, the change in employee eligibility for subsidies, and allowing for inefficiency in how we distribute this new compensation, we’ll triple our budget for this to $114 million.

Now that we’ve protected our employees, we’ll also have to pay a federal penalty of $2,000 for each employee because we no longer offer health insurance; that’s another $86 million. The total state cost is now about $200 million.

But if we keep our existing insurance plan, our cost will be $346 million. We can reduce our annual costs by over $146 million using the legislated mechanics of health reform to transfer them to the federal government.

Of course, while Tennessee will “save” $146 million, the federal taxpayer will be on the hook for the same amount when it comes time to put those state employees on the federal health insurance exchange or Medicaid.

Imagine if all states mimic the scenario Gov. Bredesen has laid out. Former Congressional Budget Office Director Doug Holtz-Eakin published a report indicating that the cost of federal insurance subsidies could be triple official projections, because many businesses would choose to drop coverage for their workers instead of offering insurance coverage. The result would be a fiscal implosion of immense proportion and the taxpayers will pay for it for generations to come.

In a way, Gov. Bredesen has figured out a way for states to get back at Washington for decades of fiscal abuse at the hands of the Medicaid program. States already dedicate nearly one-fifth of their budgets to Medicaid spending before any federal match, and that number will only increase as more and more Americans are forced to enroll in the program due to the new law.

The federal government has been forcing unfunded mandates on states for years, and now Governor Bredesen has presented a plan for payback. In chess, that’s called “checkmate.”