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From the WSJ:

Judge Vinson didn’t buy that argument. Instead he sided with the government lawyers, who argued in response that since states are free to withdraw from Medicaid if they so choose, nobody is forcing them to do anything.

Technically, that’s true. Yet notwithstanding Judge Vinson’s ruling, there is considerable practical merit in the states’ position. For one thing, federal taxes levied on the incomes of citizens in states that withdrew would simply go to support Medicaid elsewhere. These citizens would not only get nothing in return for their taxes—they would also be stuck with the cost of alternative ways to provide health care for the poor.

The plaintiffs who brought the suit heard by Judge Vinson explained: “In Fiscal Year 2010-11, Florida will spend about $20 billion on Medicaid, toward which the federal government will contribute approximately $13 billion. For Florida now to opt out of Medicaid and itself provide the same $20 billion in benefits would consume more than half its tax revenues, not counting the significant costs associated with administering such a program.”

States that have looked at the option of dropping out of Medicaid have usually stepped back in horror at what that would entail—nursing homes closing their doors, emergency rooms at hospitals overwhelmed, heart-wrenching stories in the newspapers about victims of the cutbacks. Even so, some are mulling alternatives. Indiana Gov. Mitch Daniels, for example, recently asked other Republican governors if it might be feasible for states to band together to set up their own health-insurance pool for low-income residents.

The states are also aware that other programs in which they’ve partnered with the feds are not likely to remain as lush a source of federal funding as in the past. The Republicans who now control the House are looking for ways to cut federal spending in recognition of the fact that the federal government is also in dangerous straits with its projected $1.5 trillion 2011 deficit and soaring national debt. Federal aid to education, for example, will be a prime target for spending cuts.

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