By CHUCK RAASCH, Gannett National Writer
October 29. 2009 4:28PM
WASHINGTON — The debate over whether states could opt out of a proposed federal health insurance plan is not a new one.
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Two of the federal government's biggest programs did not force states to participate or excluded some individuals when they began.
The history of these two programs, Social Security and Medicaid, could provide a roadmap for the complex debate over health care reform.
When Social Security was passed in 1935 in the midst of the Great Depression, those on Capitol Hill had widespread concern that the federal government could not constitutionally tax state and local governments. So employees of cities and states and some other workers initially were not covered.
Subsequent laws have brought many public workers into the Social Security system, but not all.
About a quarter of that work force — more than 5 million workers — still does not participate, according to the Government Accountability Office. These employees primarily depend upon retirement programs set up by the governments they work for.
These 5 million public workers are part of the 4 percent of American workers not covered under Social Security. Debate about their nonparticipation intensified in the 1990s when there was a movement by towns and cities, primarily in the West, to opt out.
Some public workers say they are shortchanged by not having access to Social Security. And some say their nonparticipation undermines a system facing long-term financing problems.
What might happen if health care reform passes and some states choose not to participate in a government health insurance option? Would states opting out balk over their citizens paying the cost of administering the program? Could it work without the economies of scale of full participation?
When Medicaid passed in 1965, the federal government made no mandate to participate, but states were given enticements — in the form of federal dollars — to cover health care for their poorest citizens. President Lyndon Johnson thought the carrot of the federal government paying for 50 percent to 77 percent of a state's Medicaid costs would be too good for states to pass up.
Some, but not all, states joined immediately. Arizona was the last to do so — in 1982.
Now, Medicaid has become one of the most expensive parts of state budgets, and the demands have grown rapidly in this recession.
The Kaiser Commission on Medicaid and the Uninsured said that enrollment this year in Medicaid was up 5.4 percent as of late September and state spending on Medicaid was growing at a 7.9 percent rate — both substantially higher than pre-2009 forecasts.
This comes while states are taking in less tax money: an 8.3 percent drop in the second quarter of 2009 in eight states that have reported, according to USA TODAY.
In 1965, Johnson administration estimates on Medicaid's long-term costs were "wildly" understated, Brookings Institution economist Gary Burtless said.
Today, Democrats say their health reform push will not increase the deficit and will eventually bring health care costs down by providing more competition and spreading the coverage pool.
Republicans say they suspect President Barack Obama's ultimate goal is a government-run health system that, given the history of government programs, is certain to cost far more than anyone is admitting to today.
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About RaaschChuck Raasch is national political writer for Gannett. His column, New Politics, appears here and on USA TODAY.com. A native of South Dakota and a graduate of South Dakota State University, Raasch has covered political campaigns since 1978, including Tom Daschle's first race for Congress and George McGovern's last race for the Senate. He has covered presidential campaigns since 1988.
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