Federal Help Has Strings Attached

In 2005, the Onion reported this headline: “State of Minnesota Too Polite To Ask For Federal Funding.” Gov. Tim Pawlenty is quoted in the article as saying, “Oh, we wouldn’t want to bother the U.S. government — they’ve got more than enough on their plate as it is.”

Last week this old spoof on “Minnesota nice” became all the more hilarious after Pawlenty issued an actual executive order that directed state agencies to not apply for federal grant funding linked to the Affordable Care Act (ACA), or Obamacare, as many are calling it.

For all those miffed and baffled by Pawlenty’s decisions to reject various federal funding opportunities, please read the Onion piece, as it might just lighten your mood on the topic. Once in better spirits, I hope you’ll then consider another point of view.

A recent Star Tribune’s editorial (“Health care ‘no’ hurts Minnesota,” Sept. 2) typifies the opposition. It lamented all the federal money Minnesota stands to lose and accused the governor of grounding his decisions in presidential politics, not principle. Unfortunately, the paper and others never acknowledge that there might be some actual principles at stake.

Allow me to fill in some facts and perspective that seem missing in the debate.

To begin, let’s be clear that federal grants are never free. Not only do they increase the federal debt — now growing at a shocking pace — they almost always come with strings attached. For instance, in return for stimulus funding, Minnesota agreed to maintain Medicaid eligibility at 2008 levels. As a result, the state could not reduce Medicaid eligibility to help balance the budget.

Federal matching funds for Medicaid have long hog-tied state efforts to reform the program. By taking federal Medicaid money, states agree to strict federal rules. Because these rules are so inflexible, good ideas to improve Medicaid for the neediest in Minnesota never get off the ground.

Federal funding tied to the ACA also comes with strings. Accepting money to expand Medicaid to low-income adults would force the state to give up on current reform efforts. Accepting money for a federal high-risk insurance pool would require the state to continue funding the state pool at current levels. Accepting money for insurance premium rate reviews would require substantial data reporting on rate increase patterns, a building block for any federal price-fixing scheme.

In addition to these strings, much of the federal funding flowing from the ACA duplicates what Minnesota is already doing. Minnesota already operates an insurance pool for people with preexisting conditions. Minnesota already reviews insurance rates. Importantly, federal funding does not replace funding for these state programs. Rather, it supplements programs when they do not necessarily need any supplementing.

Another point that seems to be lost is that the executive order does not ban all federal funding. Existing law, signed by Pawlenty, directs the state to go after a number of federal grants. Furthermore, the governor’s office retains discretion to approve any other grant.

The reality is, Pawlenty’s rejection of certain federal funds simply reflects a decision to pay very careful attention to how federal dollars will be used in Minnesota, especially when those dollars are tied, in his opinion, to a very bad law.

I know it’s a crazy notion, but the governor is saying we need to use a little thing called discretion. This is in stark and refreshing contrast to those who urge us to grab every federal dollar, no matter the consequences.

Like a majority of Americans (according to the latest CNN/Opinion Research Survey), Pawlenty sincerely opposes the ACA. And, in his executive order, he outlined sound policy reasons for this opposition. Specifically, the order explains how the ACA intrudes into individual liberty, makes massive new spending commitments, assumes unrealistic future cost savings, raises taxes and fees, and increases federal control over health care.

Saying that this is all politics — presidential or otherwise — is simply a shortcut to discredit the governor’s policy positions without truly engaging the issues.

— Peter Nelson is a policy fellow at the Center of the American Experiment in Minneapolis.

This commentary originally appeared in the Star Tribune on September 14, 2010. 

Permission to reprint in whole or in part is hereby granted.