The Summer issue of National Affairs is out and it includes a look by John Hood at Medicaid, the government heath care coverage for the poor that will see a big expansion under ObamaCare:
Medicaid is not just a health-care program. It is the largest single component of America's welfare state, far outweighing the dollar value of cash assistance, food stamps, or housing aid. Like these other programs, Medicaid often provides implicit disincentives to work, since increases in income can mean the loss of eligibility for a very valuable benefit. Unless future policymakers introduce reforms to help break the generational cycle of dependency — fixes based on principles that have worked in other welfare overhauls, like time limits and work requirements — the prospect of losing thousands of dollars a year in essentially free health care will perpetuate strong incentives against moving up the economic ladder. Refusing work, or accepting off-the-books jobs with few long-term prospects, will become rational choices for families facing the steep effective tax rates created by the eligibility rules for Medicaid (and soon to be made worse by Obamacare).
The unfortunate reality, however, is that there is now a large industry of lawyers, accountants, and financial planners skilled at arranging the assets of middle-class families so that, when the time comes, their parents or grandparents will qualify for Medicaid. By moving assets around, transferring money or property to children, and otherwise gaming the system, middle-class seniors can save their families the immense cost of long-term care (at the public's expense, of course). In total, seniors account for 10% of Medicaid enrollees — and one-quarter of Medicaid spending.