Medicaid is a big topic of conversation in my house. That’s not because we’re on it — it’s because my wife’s pediatric practice is up to its eyeballs in patients on AHCCCS, Arizona’s implementation of the program. Encouraged by federal matching dollars, Arizona, over the years, expanded the program to cover a big percentage of the states population. AHCCCS patients now constitute a majority of my wife’s patients.

Like most states in these less-flush times, Arizona is now scrambling to rein-in spending. There are a couple of ways that state legislators can do it, but given the degree to which expenditures have ballooned over the years, they’re all going to hurt. Depending on the choices that legislators make, my wife’s practice could very well go under.

But I’m preparing rather than complaining, because I can’t think of a painless alternative. States are hobbled by the federal government’s rules in the extent to which they can cut Medicaid costs. That means states are looking for federal waivers — and even considering dropping out of Medicaid.

To put things in perspective, here’s a history of Arizona’s tax revenues (PDF) over the past few years.

(All numbers in thousands of dollars)

Preliminary FY 2010
6,061,423.6
-9.2%

Actual FY 2009
6,678,297.5
-20.3%

Actual FY 2008

8,374,397.0
-8.8%

Actual FY 2007
9,186,046.2
3.3%

Tax revenues have been shrinking, consistently, since 2007, though state number crunchers are (optimistically) predicting a small increase for 2011.

Total General Fund revenues are rather higher, given the sugar-daddy relationship of the federal government to the states. Once you add in such line items as “Net revenue enhancements/one-time adj.” — an item that has gone from zero in 2001 to over two billion dollars in 2010 — total General Fund revenues have still dropped from $9,625,786.0 in 2007 to $8,322,087.3 in 2010.

Which is to say, that even heavily subsidized by an itself-broke federal government, Arizona’s state government is … well … a bit tight.

Actual expenditures are way the hell higher, largely because of yet more federal money and because of borrowing. You can see what that means in terms of who cuts the checks in this chart (Source here):

And all that shrinking pool of money is pretty heavily committed to some specific programs.

That’s right. AHCCCS — Arizona’s implementation of Medicaid — consumes 26% of the original FY 2011 budget. It’s been growing steadily for years — from 17% of expenditures in 2007 to 30% of the latest figures (after cuts in other areas of the budget). That’s in budgets based largely on subsidies and fantasy. And a big chunk of those federal subsidies is scheduled to disappear this year. Reports the New York Times, “On July 1, the enhanced federal aid will disappear, causing an overnight increase of between one-fourth and one-third in each state’s share of Medicaid’s costs.”

Oh … Did I make explicit the fact that Arizona’s state government has been spending more than it takes in? Yeah. Except for a few flush years in the middle of the decade (real estate was very good to Arizona, for a while) Arizona has been purchasing red ink by the tanker truck. It’s really pretty impressive.

What makes this even sadder is that most of the people on Medicaid’s rolls are (relatively) blameless. Yes, there are scam artists here and there, but most of these people have limited means, and quite rationally took advantage of a program that offered them medical coverage at little cost to themselves. Few of us stop to look at  the meta picture when we sign up for attractive deals, and so a growing proportion of Arizona’s (and America’s) population has been growing dependent on a government program that has become increasingly economically non-viable.

And the medical practices that serve that population are also dependent on a program that is spending dollars that don’t exist.

Of course, it was easy to expand Medicaid by playing the compassion card, especially when it came to covering children. Who wants children to suffer, no matter what choices their parents have made? Wave a few photos of wide-eyed tots, make a few promises, and …

And millions of people have become dependent on programs that are unsustainable.

Here’s the thing. Forget about arguments over the proper role of government. If politicians and their enablers make promises that lead people to depend on government for things that it can’t possibly continue to provide, those oh-so-caring demagogues are not compassionate, they’re pricks.

I’ll admit that I knew better, and I’ve been sweating the arrival of the day of reckoning ever since learning the extent of my wife’s practice’s AHCCCS-dependency. We’re resilient though, and I expect my family to land on its feet.

But the people who will really suffer are those who have few means, and who could have made other arrangements and planned their lives differently if they hadn’t been led to depend on grandiose and unsustainable promises.

From the Financial Times:

The UK’s Conservative-led coalition has announced the most drastic budget cuts in living memory, outstripping measures taken by other advanced economies which are also under pressure to sharply reduce public spending. …

The UK cuts of £81bn ($128bn) over four years are the equivalent of 4.5 per cent of projected 2014-15 gross domestic product. Similar cuts in the US would require a cut in public spending of about $650bn, equal to the projected cost of Medicare in 2015.

The UK deficit is about 10 per cent of 2010-11 GDP. The US deficit was $1,294bn, or 8.9 per cent of GDP, in the 2010 fiscal year.

Declaring that “today is the day where Britain steps back from the brink”, George Osborne, the chancellor of the exchequer, revealed dramatic reductions to core departments over the next four years, a £7bn fall in welfare support and 490,000 public-sector job cuts by 2014-15.

Actually, I’m just kidding about rejoining the UK, what with some significant differences in free speech protections, self-defense laws and other civil liberties issues. But if the Brits want to handle our federal government’s spending policies for a few years…