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Archive for the ‘Medicaid’ Category

Self awareness is supposed to be a good thing, so I’m going to openly acknowledge that I have an unusual fixation on the size of government.

I don’t lose a wink of sleep thinking about deficits, but I toss and turn all night fretting about the overall burden of government spending.

My peculiar focus on the size and scope of government can be seen in this video, which explains that spending is the disease and deficits are just a symptom.

Moreover, my Golden Rule explicitly targets the spending side of the budget. And I also came up with a “Bob Dole Award” to mock those who mistakenly dwell on deficits.

With all this as background, you’ll understand why I got excited when I started reading Robert Samuelson’s column in today’s Washington Post.

Well, there’s a presidential whopper. Obama is right that the role of the federal government deserves an important debate, but he is wrong when he says that we’ve had that debate. Just the opposite: The White House and Congress have spent the past five years evading the debate. They’ve argued over federal budget deficits without addressing the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving… The avoidance is entirely bipartisan. Congressional Republicans have been just as allergic to genuine debate as the White House and its Democratic congressional allies.

By the way, I have mixed feelings about the final sentence in that excerpt. Yes, Republicans oftentimes have displayed grotesque levels of fiscal irresponsibility. Heck, just look at the new farm bill. Or the vote on the Export-Import Bank. Or the vote on housing subsidies. Or…well, you get the point.

On the other hand, GOPers have voted for three consecutive years in favor of a budget that restrains the growth of federal spending, in large part because it includes much-needed reforms to major entitlement programs such as Medicare and Medicaid.

But Republican inconsistency isn’t our focus today.

I want to address other parts of Samuelson’s column that left a bad taste in my mouth.

He argues that you can’t balance the budget merely by cutting discretionary programs. That’s technically untrue, but it’s an accurate assessment of political reality.

I’m much more worried about his assertion that you can’t balance the budget even if entitlement spending also is being addressed.

Let’s look at what he wrote and then I’ll explain why he’s wrong.

Eliminating many programs that are arguably marginal — Amtrak, subsidies for public broadcasting and the like — would not produce enough savings to balance the budget. The reason: Spending on Social Security, Medicare and other health programs… But even plausible benefit trims for affluent retirees would still leave deficits. There would still be a need for tax increases.

This is wrong. Not just wrong, but demonstrably inaccurate.

The Ryan budget, for instance, balanced the budget in 2023. Without a single penny of tax hikes.

Senator Rand Paul and the Republican Study Committee also have produced balanced budget plans. Even as scored by the statists at the Congressional Budget Office.

By the way, you don’t even need to cut spending to balance the budget. Spending cuts would be desirable, of course, but the key to eliminating red ink is simply making sure that government spending climbs at a slower rate than revenues.

And since revenues are expected to grow by about 6 percent per year, it shouldn’t take advanced knowledge of mathematics to realize that the deficit will fall if spending grows by less than 6 percent annually.

Indeed, we could balance the budget as early as 2018 if spending merely was restrained so that the budget grew at the rate of inflation.

But never forget that the goal of fiscal policy should be shrinking the size and scope of the federal government, not fiscal balance.

Ask yourself the following questions. If $1 trillion floated down from Heaven and into the hands of the IRS, would that alter in any way the argument for getting rid of wasteful and corrupt parts of the federal leviathan, such as the Department of Housing and Urban Development?

If the politicians had all that extra money and the budget was balanced, would that mean we could – or should – forget about entitlement reform?

If there was no red ink, would that negate the moral and economic imperative of ending the welfare state?

In other words, the first part of Samuelson’s column is right. We need a debate about “the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving.”

But we’re not going to come up with a good answer if we don’t understand basic fiscal facts.

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When you work in Washington (and assuming you haven’t been corrupted), you run the risk of being endlessly outraged about all the waste.

But not all waste is created equal. Some examples are so absurd that they deserve special attention.

We now have another example to add to the list. Russian diplomats have been busted for bilking the Medicaid program of more than $1 million.

This is so outrageous that it may actually be the impetus for some desperately needed reform, as I suggest in this interview with Neil Cavuto.

But is fraud really a problem? Defenders of the Medicaid entitlement presumably would like us to think that this latest story is just an anomaly.

That would be nice, but the experts who have looked at the issue have come to a much different conclusion.

While food stamp fraud is significant, especially with a record-high 47 million Americans now on food stamps, it pales in comparison to what is stolen from Medicare and Medicaid. …It is widely accepted across the political spectrum that upwards of $100 billion of that amount is fraud and abuse. Recently, a report from the Oversight and Government Reform Committee in the US House of Representatives outlined many billions of dollars being wasted every year just in New York’s Medicaid program. Grossly inflated payments to intermediate care facilities and excessive salaries were just the tip of the iceberg in a $53 billion program that easily bleeds  more than $10 billion annually to criminals.

So what’s the best way of dealing with the Medicaid mess? Fortunately, we have a simple answer. As I mentioned in the interview, the entire program should be block granted and turned over to the states.

That doesn’t automatically eliminate fraud, but it does create much better incentives for sound governance since state taxpayers would be the ones picking up the tab if a state program is riddled with fraud. Under the current system, by contrast, the cost of waste and malfeasance is spread among taxpayers from all 50 states.

This video from the Center for Freedom and Prosperity explains how block grants would work.

One final point to emphasize is that fraud reduction is really just a fringe benefit if we reform Medicaid.

The main reasons to decentralize the program are fiscal sanity and better health care policy.

But the one common thread is that third-party payer facilitates problems, whether we’re looking at excessive costs, health inefficiency, or rampant fraud.

P.S. Don’t forget the other two big entitlements that need reform, Social Security and Medicare. Like Medicaid, Medicare has major challenges with fraud. From what I understand, the retirement portion of Social Security doesn’t have major fraud issues, but the disability program is a huge problem.

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I’m glad I work for a principled and libertarian organization. At the Cato Institute, there’s never any pressure to say or do the wrong thing for partisan reasons.

When Republicans screw up, I don’t have to think twice about exposing their misdeeds.

I have repeatedly criticized President Bush (and his former top aide) for expanding the burden of government. Buying votes with other people’s money isn’t compassionate.

Incurable spendaholics?

I have excoriated former GOP Hill staffers who became lobbyists for various special interests groups looking to fleece taxpayers. Stealing is wrong, even when you get a lot of money to use government as middleman.

I have slammed a former Reagan Administration official for defending earmarks. I think it is morally offensive that he gets rich by facilitating the transfer of money from taxpayers to powerful interest groups.

I have condemned the former Senate Republican leader for defending Obamacare. I think it is disgusting that he puts his lobbying income ahead of America’s best interests.

I have denounced Illinois Republican legislators for killing school choice. I think it is downright nauseating that they condemn inner-city children to terrible schools in exchange for campaign contributions from teacher unions.

And I have pointed out that statist policies don’t become acceptable merely because they come from Republican presidential candidates. The road to serfdom oftentimes is bipartisan.

We now have another candidate for our “Republican Hall of Shame.” The governor of Ohio, John Kasich, is embracing Obamacare. Moreover, not only does he want bad healthcare policy, but he’s using third-world tactics and making morally reprehensible arguments.

The Wall Street Journal savages Kasich in a stinging editorial. Here’s a key excerpt that explains the overall situation.

…there are still a few disciples with faith in an ObamaCare higher power, and one of them happens to run Ohio. Governor John Kasich is so fervent a believer that he is even abusing his executive power to join the Affordable Care Act’s Medicaid expansion. Not to be sacrilegious, but the Republican used to know better. Now Mr. Kasich seems to view signing up for this part of ObamaCare as an act of Christian charity and has literally all but claimed that God told him to do so.

But Gov. Kasich has a slight problem. The legislature hasn’t approved this budget-busting part of Obamacare. So Kasich has decided that he can arbitrarily change policy, just like Obama did with the employer mandate and the Obamacare exemption for Capitol Hill.

The problem is that his evangelizing failed to convert the Ohio legislature, which is run by Republicans who understand the brutal budget and regulatory realities of participating in new Medicaid. So Mr. Kasich simply decided to cut out Ohio’s elected representatives and expand Medicaid by himself. …he appealed to an obscure seven-member state panel called the Controlling Board, which oversees certain state capital expenditures and can receive or make grants. …Mr. Kasich asked the panel to approve $2.56 billion in federal funding, and then he’ll lift eligibility levels via executive fiat. It’s a gambit worthy of President Obama, who also asserts unilateral powers to suspend laws that displease him and bypass Congress.

But what’s really nauseating is that Kasich equates big government and welfare spending with religious values.

Mr. Kasich really must feel like he’s guided by the Holy Spirit… “When you die and get to the meeting with St. Peter, he’s probably not going to ask you much about what you did about keeping government small. But he is going to ask you what you did for the poor,” to quote one of his favorite lines.

I suppose I could make a joke about communists presumably being super religious if you use this twisted metric, but there’s a serious point to be made. I’m not a religious scholar, but I wrote several years ago that, “Doesn’t Christianity (and, I assume, Judaism and other faiths) require individuals – using free will – to act charitably? Using the coercive power of government to forcibly redistribute other people’s money, by contrast, is moral preening at best.”

Moreover, Kasich must be delusional if he thinks making government bigger is good for the poor. Redistribution traps the poor in dependency and a larger public sector hinders economic growth, making life even more difficult for the less fortunate.

Heck, just compare Hong Kong and Argentina over the past 50-plus years and ask yourself which jurisdiction afforded more opportunity for those trying to climb the economic ladder.

Fortunately, the battle isn’t over yet.

Thirty-nine House Republicans signed a formal protest and some of them are threatening to sue, and well they should. They argue that circumventing the legislature subverts the Ohio constitution’s separation of powers and exceeds the statutory legal authorities of the Controlling Board, which is supposed to “take no action which does not carry out the legislative intent of the General Assembly.”

I don’t know whether a legal case will be successful, but I can share data showing that Ohio already is in deep fiscal trouble.

It ranks 39th in the Tax Foundation’s State Business Tax Climate Index.

It was the 7th-worst state on controlling spending over the past decade.

It ranks in the bottom 10 on measures of bureaucrats to teachers.

It was listed as one of America’s 11 states facing an economic death spiral.

And John “Barack” Kasich thinks he’ll make Ohio better by adding an additional layer of government spending to finance Obamacare expansion?!?

What makes this situation so sad is that Kasich was Chairman of the House Budget Committee in the mid-1990s, so he deserves some of the credit for restraining federal spending during that period, a very successful policy that led to better economic performance and budget surpluses.

P.S. Kasich’s push to expand Medicaid shows one of the reasons the program should be reformed. He’s being lured by the promise that Washington will pick up the entire tab for the first few years. Afterwards, state taxpayers will get saddled with some of the burden, but Kasich probably assumes he won’t be around to deal with that problem. This is why the entire program should be block-granted to the states. If Kasich really thinks God wants a bigger Medicaid system, he should go to Ohio voters and ask them to pay for it.

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According to my reader poll, Michael Ramirez is the nation’s best political cartoonist.

His new masterpiece about entitlements is a good example of his talent. In one image, he manages to convey how the system lures people into danger by offering the illusion that they can get something for nothing.

Ramirez Entitlement Cartoon

The cartoon is an apt illustration of where we are today with programs such as Food Stamps and disability, with ever-greater numbers of people being lured into lives of dependency.

In other cases, though I’m afraid we’ve already passed the point of biting the hook, particularly for many of the middle-class entitlements. We’re now being reeled in and face a very real danger of being turned into euro-style fish filets.

Though if I’m allowed to extend the metaphor, many people are working to reform Social Security, Medicare, and Medicaid in hopes of escaping the hook of dependency and fiscal crisis.

But it’s very important to realize that not all entitlement reform is created equal. As I explained back in 2011, the left would be more than happy to impose price controls and means testing as part of a “grand bargain” that seduces gullible Republicans into accepting a tax hike.

Which is why this Glenn Foden cartoon hits the nail on the head.

Foden Entitlement Cartoon

Sort of reminds me of this Ramirez cartoon. Simply stated, Republicans are dangerously susceptible to bad deals, which helps to explain why tax-increase budget agreements are always fiscal disasters.

The moral of the story is that we need the right kind of entitlement reform, but that won’t be possible until at least 2017.

P.S. If you want a tragically funny look at how the welfare state changes people for the worse, read the politically correct version of The Little Red.

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This is a tough question.

I obviously want comprehensive reform of all entitlement programs, so selecting just one is a bit of a challenge. Sort of like being asked to pick your favorite kid.

Would I reform Social Security? That’s a logical choice. It’s the biggest program in the federal budget, so it’s presumably the biggest problem.

And it sure would be nice to have personal retirement accounts, just like Australia, Chile, and other nations that have modernized their systems.

CBO Health Care Long Term Spending ForecastBut Medicare and Medicaid are growing faster than Social Security and the Congressional Budget Office projects that those two entitlements eventually will become a bigger burden on taxpayers than Social Security.

And since our goal should be to minimize the long-run burden of government spending, that suggests that it’s more important to reform the healthcare entitlements.

But which program should be fixed first?

There’s certainly a strong case to deal with Medicare. The health program for the elderly already is very expensive and it’s going to become even more of a budget buster because of demographic changes.

Moreover, shifting to a “premium support” system would be good for seniors since they would have the ability to pick a plan best suited to their needs. Basically the same type of system now available to members of Congress.

All things considered, though, I would deal first with Medicaid. There are three reasons why I would target the health program designed to supposedly help the poor?

  1. Medicaid is hugely expensive today and will become even more costly over time.
  2. The block-grant reform proposal is a good first step for restoring federalism.
  3. Obamacare can be partly repealed by block-granting the exchange subsidies as part of Medicaid reform.

For more information, here’s my video explaining how to reform the program.

I’m not going to cry – or even complain – if politicians instead decide to fix Medicare or Social Security. Just so long as they’re taking steps in the right direction, I’ll be happy.

What I don’t want to see, however, is a gimmicky plan such as Simpson-Bowles that merely papers over the underlying problems for a couple of years. The wrong type of entitlement reform is probably worse than doing nothing.

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When I travel, particularly overseas, I run into a lot of people who are totally confused about the American healthcare system.

For all intents and purposes, they think the United States relies on the free market and that government (at least in the pre-Obamacare era) was largely absent.

So they are baffled when I tell them that nearly one-half of all health expenditures in America are directly financed by taxpayers  and that the supposedly private part of our healthcare system is massively distorted by government interference and intervention.

When explaining how government has screwed up private health insurance, I talk about third-party payer and  how genuinely private insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) abortion.

But from now on, I think I will simply tell people to watch this superb video from Reason TV.

This shows how a true free market operates. Efficiency and low prices are the norm, and consumers get a good deal.

My only quibble is that the video doesn’t explain how government policies – such as the healthcare exclusion in the tax code – should be blamed for the grotesque waste, inefficiency, and featherbedding in most parts of the medical industry.

But that’s a minor gripe. You should share this post with any and all fuzzy-headed friends and colleagues and tell them this is how smoothly the market would work if the government simply would get out of the way.

And if they want another example, here’s a report from North Carolina on free-market healthcare in action.

If we want this kind of system to be the rule rather than the exception, we need to scrap the healthcare exclusion in the tax code as part of a switch to a simple and fair flat tax. That will help bring some rationality to the health insurance market and address the part of the third-party payer crisis caused by indirect government intervention.

Then we also should reform Medicaid and Medicare to help address the part of the third-party payer crisis caused by the direct government intervention.

P.S. As this poster cleverly illustrates (and as Ronald Reagan correctly warned in the second video of this post), government is the problem, not the solution.

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This election season has seen lots of talk (and demagoguery) about whether investors, entrepreneurs, and small business owners should be hit with class-warfare tax policy.

And there’s also been lots of sturm and drang about the best way of averting bankruptcy for Medicare, which is the federal government’s health care program for the elderly.

But there’s been surprisingly little discussion so far about the issue of Medicaid, which is the federal government’s health program for poor people.

I’m not prone to optimism, but I can’t help but wonder if this is because even statists grudgingly accept that the program needs to be reformed.

If so, the right approach is block-granting the program back to the states. Here’s some of what Paul Howard and Russell Sykes had to say about the issue in the Wall Street Journal.

Medicaid, America’s safety-net program for more than 62 million low-income uninsured Americans, is broken. It’s broken at the state level, where program costs are swamping state budgets. It’s broken for federal taxpayers, as Medicaid waste, fraud and abuse drain tens of billions of dollars from federal coffers every year. …The best hope for Medicaid reforms that can improve care for low-income enrollees, reduce fraud, and put the program on a sustainable trajectory is to cap federal spending to the states by using block grants. Block grants would offer states a predictable source of federal funding in return for broad state flexibility in Medicaid administration, benefits and copays.

Howard and Sykes explain that the federalism approach already has been tried with welfare reform, which was very successful.

We know that well-designed block grants can work and attract bipartisan support. The best example is the successful 1996 Temporary Assistance for Needy Families program for welfare reform, which helped move millions of women and children out of poverty and into the workforce. Critics of Medicaid block grants argue that they would leave insufficient funds to cover new state expenses, creating a “race to the bottom” as states slashed funding on services for the poor. But such objections were also raised about block-granting welfare, and they turned out to be wrong.

They also reveal some very useful and interesting information about a test program in Rhode Island that shows the benefits of shifting health care decisions to the state level.

In 2009, Rhode Island accepted a five-year cap on combined state and federal Medicaid spending as part of a waiver from the federal government. ..To date, Rhode Island projects that by various new measures—focusing on community-based care that keeps seniors out of expensive nursing homes, for instance, and medical supervision that can keep children and adults out of emergency rooms—the state has saved $100 million. The flexibility to plan care has also helped reduce its projected Medicaid spending rate to 3% from 8% annually.

It’s worth noting, by the way, that Rhode Island is a very left-leaning state. Indeed, one of the reasons why I’m semi-optimistic about Medicaid reform is that governors and state legislatures – regardless of partisan affiliation – know that the current Medicaid system is unsustainable.

For more information, here’s my video explaining why block grants and federalism are the right way of dealing with Medicaid.

Since I’m not used to being optimistic, let me also give you a nightmare scenario for how this issue could evolve. My greatest fear is that a future president (perhaps Romney!) will decide to impose a value-added tax. In normal circumstances, that might upset state politicians since it would complicate their efforts to impose sales taxes.

But if a future President promised to have the federal government take over 100 percent of Medicaid financing, I suspect state politicians would jump at the trade.

So we would get the worst of all worlds. A giant new tax and more centralization.

P.S. Here’s the full three-part video series on entitlement reform.

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