Last week, Michigan became the 25th state to embrace that expansion, made optional by the U.S. Supreme Court's June 2012 decision upholding the law. A bipartisan coalition in the state's Republican-dominated Legislature joined with Republican Gov. Rick Snyder to overcome opposition that came not only from conservative legislators, but from many hard working Americans who resent the fact their tax dollars will go to pay for something that they themselves have difficulty affording.
Opponents of expanding Medicaid in Michigan and elsewhere have relied heavily on the tax angle in making their case against the expansion. They point out the federal dollars, which will cover 100% of the costs in the first three years, are not free but come from the current or future taxes needed to pay off a federal debt that continues to grow.
They further argue that the state share eventually grows to 10%, which will put a heavy obligation on future taxpayers in their states. And they legitimately worry about the “woodwork” effect: Millions of already Medicaid-eligible people are likely to get sent the program's way after attempting to buy plans on the new exchanges. States inundated with these new enrollees in traditional Medicaid will receive only the usual 50% federal match—not the 100% contained in the ACA.
But this focus on direct taxes ignores the underlying economics of providing care for the uninsured. We thankfully live in a society that requires providers to provide healthcare services for the indigent who show up on their doorsteps. This uncompensated and charitable care isn't free. It gets passed along to those who pay for their healthcare in the form of higher prices, which translates directly into higher insurance premiums.
These rising insurance premiums, paid mostly by employers but also by the growing copays and deductibles assessed employees, are no different than a tax. Every economist knows a dollar paid by an employer for health insurance is a dollar that is taken straight out of wages.