J. Scott Moody | State Budget Solutions
Stethoscope Money
Medicaid expansion under the Affordable Care Act, more commonly known as Obamacare, might in theory sound like a no-brainer. Its advocates claim that expanding Medicaid would come at no cost to Utah taxpayers — at least during its first three years of implementation.

In the real world, however, there is no such thing as a “free” government program: the money has to come from taxpayers in the first place. Moreover, expanding Medicaid would permanently exact a high economic cost on the state’s economy.

Additional government spending would only shift Utah’s economy further away from the private sector — the very source of a state’s wealth and opportunity for its residents. We have seen this story unfold in other states that have grown their social welfare programs, to the great detriment of their economies.

Consider Maine’s economy versus that of New Hampshire. You might call it “A Tale of Two States.” Even before Obamacare, a few states were aggressively growing their Medicaid programs. Maine was one of those states; New Hampshire was not.

Maine today has one of the highest rates of Medicaid enrollment in the nation; New Hampshire has one of the lowest. Similarly, Maine had for decades been growing its overall public sector through sales taxes, income taxes, and other new revenue streams. New Hampshire, by contrast, maintained lower taxes and restrained government spending.

While they started out with very similar private sectors and per household incomes, New Hampshire has steadily pulled away from Maine in both measures. Today New Hampshire’s private sector as a percent of personal income is among the nation’s largest; Maine now ranks a dismal 42nd in the union. As a result, New Hampshire’s per household income is now 33 percent higher than Maine’s — $126,865 versus $95,537, respectively.

Aside from this great divergence in public policy, Maine and New Hampshire remained similar in virtually every respect. The neighboring states have nearly identical climates, demographics and cultural affinities.

Maine’s experience ought to serve as a cautionary tale for the Beehive State. The Orwellian-named “Healthy Utah” program would add $258 million in Medicaid spending annually. In a study issued last year by Federalism In Action, I concluded this would cost Utah’s private sector a whopping $749 million. In human terms, this would mean either $805 less income per household, or 14,125 lost jobs.

It isn’t very hard to connect these dots. By favoring public sector growth, Maine residents lost out on both jobs and income relative to New Hampshire. If Utah were to expand Medicaid, the state would follow the economic path of Maine rather than New Hampshire — and everyday Utahns would learn the hard way just how costly “free” government money can be.

J. Scott Moody is the chief executive and chief economist for State Budget Solutions.

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