MERCER: Socialism in a democracyPIERRE — As South Dakotans weigh the social merits and the financial perils of embracing expanded Medicaid coverage available under Obamacare, let us take a breath and look at two other federal programs that embody the same principle of offering a big benefit to all.
By: Bob Mercer, Republic Capitol Bureau
PIERRE — As South Dakotans weigh the social merits and the financial perils of embracing expanded Medicaid coverage available under Obamacare, let us take a breath and look at two other federal programs that embody the same principle of offering a big benefit to all.
Here are the opening four sentences from the latest annual message to the public from the Social Security and Medicare boards of trustees:
“The long-run actuarial deficits of the Social Security and Medicare programs in 2012, though in each case for different reasons.
“The actuarial deficit in the Medicare Hospital Insurance program increased primarily because the Trustees incorporated recommendations of the 2010-11 Medicare Technical Panel that long-run health cost growth rate assumptions be somewhat increased.
“The actuarial deficit in Social Security increased largely because of the incorporation of updated economic data and assumptions.
“Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”
The message gets scarier from there as the trustees explain the details of why the two programs are in such difficulty now, and how much more difficult the future will be as the Baby Boom generation rolls into senior-citizen age.
One of the immediate reasons is the Social Security tax reduction that we received now for two years. The tax cut reduced payments by $103 billion in 2011 and by an estimated $112 billion this year.
Congress replaced that money by shifting general funds. Because the federal government is running annual deficits upward of $1 trillion, that money was truly borrowed.
Congress essentially put those hundreds of billions of dollars in tax cuts onto the federal credit card, whose unpaid balance gets worse each day.
That’s just one example of the financial insanity that’s been happening for a long time in Congress. It seemed to go through the roof under the George W. Bush and Barack Obama administrations amid the Middle East wars and two economic recessions in the same decade.
Within South Dakota we have our own troubles with public-pension systems that are under-funded.
The South Dakota Retirement System remains out of financial balance because the market values of its investments remain worth less than the long-term liabilities. As of June 30, the end of its 2012 fiscal year, the system was funded at just 93 percent.
That was a deterioration from the 96 percent at which the 2011 fiscal year ended.
Those difficulties have real economic consequences. The SDRS trustees by state law were allowed to grant only the minimum of a 2.1 percent cost of living increase for benefits for the coming year.
Until 2010 SDRS was giving a 3.1 percent COLA regardless of the investment performance and the system’s financial condition.
The system under the Rounds administration was perceived to be so flush with money that government employees were allowed to retire, so they could collect their retirement checks, and then be rehired in the same jobs.
But as the system began to fall into the red, that practice was reined in somewhat, through restrictions intended to make retire-rehire less financially attractive. And a benefit increase that was recommended by the trustees and approved by the Legislature had to be withdrawn.
SDRS is in better shape than many other public-pension programs, however, including one in South Dakota. The cement plant retirement fund needs about $1.5 million annually for the next 15 years or so.
That money will need to come from the Legislature at the expense of other programs. The Legislature stuck $1 million into the cement-plant retirement fund this year, and Gov. Dennis Daugaard recommended Tuesday that $2 million be appropriated by the Legislature in 2013.
What does all of this have to do with Medicaid expansion?
We really can’t determine what South Dakota taxpayers would pay for the $200 million that reportedly would be received from the federal government by adding some 48,000 adults to the Medicaid enrollment.
South Dakota Democrats have made Medicaid expansion their priority for the 2013 legislative session. The governor, a Republican, isn’t interested.
Democrats are low-balling the stateside costs, claiming $1 million to $2 million annually at the start for administrative expenses.
House Democratic leader Bernie Hunhoff said that number was used by Daugaard and one of his top aides, Deb Bowman, at a breakfast meeting Tuesday before the governor’s budget speech.
In his speech, the governor said his latest numbers showed the state’s cost could be $43 million to $44 million by 2020.
The Democrats in a news release a week ago said this:
“The costs to South Dakota state government are minimal.
“According to the Center on Budget and Policy Priorities, Medicaid expansion will bring in $2.1 billion federal dollars to South Dakota over 10 years at an average annual state cost of $15.7 million.
“Including net savings from uncompensated care, the average annual cost could drop to $9.5 million over 10 years, according to the Kaiser Foundation.”
A month ago South Dakota voters rejected an additional 1 percent of sales tax that would have provided about $90 million more to public schools and about $90 million more for Medicaid.
The proposed law would have specifically earmarked some of the money for paying the state’s costs for Medicaid expansion.
The vote on Initiated Measure 15 was 151,498 yes and 198,586 no. It is impossible to say, without detailed results from exit polling, how many of the no votes were specifically against the tax increase or the increased funding for schools or against higher reimbursements for Medicaid providers or against Medicaid expansion.
But we do know this. Voters rejected the funding source for Medicaid expansion. The South Dakota Retirement System is under water. The cement plant retirement fund is on a path to go broke. Medicare and Social Security are in a deficit.
Some of the problems are due to inattention and generous assumptions. But overall, this is what we get, when taxpayers in a democracy take priority among their elected officials above collecting enough money to pay for the promises of socialism programs.