Where Does Government Get Money?

FEBRUARY 28, 2013 | by NATHAN BENEFIELD

Where does the federal government get its money? Does it grow on trees? Does it fall from the sky like manna from heaven? Is there a genie who keeps granting wishes for unlimited funds?

Of course not, it comes from taxpayers. Government has nothing to give anyone except what it first takes from someone else.

So why do supporters of expanding the troubled Medicaid program in Pennsylvania not recognize that government spending is taken out of the economy through taxes or borrowing (paid with interest by future taxes)? Consider this quote by state representative Gene DiGirolamo:

DiGirolamo called it a "huge infusion" of money. "I'd hate to see us leave that money in Washington. ... These people are going to show up at the hospital anyway. We're going to pay for it somehow."

Not spending more taxpayer dollars doesn't leave "money in Washington." It leaves money in the hands of hard-working men and women. In contrast, the Affordable Care Act requires 20 new taxes to pay for all of this spending. Even Democrats like Sen. Bob Casey want to repeal some of these tax hikes, realizing they are killing jobs across the country.

The second part of DiGirolamo's claim about Medicaid spending is also myth. Because of low reimbursement rates, Medicaid costs are shifted to those with private insurance, resulting in higher insurance premiums for everyone. In fact, Medicaid cost-shifting greatly exceeds cost-shifting from "uncompensated care."

Moreover, low reimbursement rates explain why one-third of doctors don't take Medicaid patients, and Medicaid recipients have longer wait times and often get lower-quality care.

In other words, what DiGirolamo and others are calling for is higher federal taxes, higher state spending, higher costs for health insurance, and worse health care for the poor. Instead of hoping for magical money for Medicaid, lawmakers should look to real solutions to lower health care costs.



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