The most important disagreement between Romney and Obama that keeps not getting covered properly is the dispute over Medicaid. The Obama administration wants to spend a lot of new money to provide Medicaid coverage to a much larger set of the working poor. Romney, by contrast, wants to spend drastically less money on the program in a way that’s going to cripple states’ ability to provide coverage for things like nursing home or home care for the elderly and disabled. Notionally, Romney’s idea is that by not merely implementing huge cuts in funding levels but also offering states more flexibility about the rules that he’ll be able to usher in a bright new era of innovation. As he said last night, “States like Arizona [and] Rhode Island have taken these Medicaid dollars [and] have shown they can run these programs more cost-effectively.”
But as my friend Jeff Young writes, in fact “Arizona and Rhode Island, like other states that have reformed Medicaid with federal approval, did so by tapping funding above what Romney’s proposal would allow.”
In the real world, what happens if you’re given less money to cover people with and more flexbility about what to do with it what you’re going to do is simply cover fewer people. In particular, care for the elderly and disabled are likely to get hammered over the long-term thanks to productivity issues. Medical technology does advance and that sometimes leads to great new things—pills that treat illnessness, machines that help us test for disease—but the foundation of long-term care for the elderly and the disabled is human attention. People who need help caring for themselves on a day-to-day basis need help from other human beings. If you take the main public program for financing that kind of care and insist on its budget shrinking as a share of GDP, then the people who need help are out of luck. As economy-wide productivity rises, it’ll get harder and harder to “afford” programs that provide labor intensive care even in the real world society will be richer than ever.