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Abuse a Feature, Not Failure of Bigger Government

I think the most significant thing to come out of the trio (so far) of Obama administration scandals last week was how they pointed out the cognitive and practical failures of “progressive” beliefs about big government. They’re scrambling to define the abuses and failures of government agencies and individuals as aberrations of a government that oversees, well, everything when in fact these types of failures are inevitable features of central planning and the belief that a governing elite of well-intentioned experts can guide us lesser souls to happiness and fulfillment by rationally and scientifically allocating resources and regulating behavior.

This is nonsense.

If you have ten minutes right now before going any further, read I Pencil by Leonard Read. That along with the brief intro by current FEE president Larry Reed and an afterward by Milton Friedman say everything I want to say, only better than I can say it. And well before I ever thought of it.

If you don’t have ten minutes right now then bookmark the I Pencil link and read it later. Here, in a nutshell, is what it says:

1. What kind of arrogant idiot (I’m going with idiot even though I’m thinking something else) thinks they can possibly know the wants and needs or “what’s best” for an entire society full of people with as many tastes, value systems, priorities, hopes, dreams, fears, talents, challenges and even luck as there are social security numbers?

2. Assuming they know what’s best for everybody, what kind of arrogant idiot thinks they can measure, produce and allocate every resource, from the raw materials to delivery of the finished product, to every person to allow them to fulfill their dreams and desires?

3. Assuming they know what makes everybody happy and that they can provide everything to make everybody happy, what kind of arrogant idiot thinks, where humans are involved, that the massive power to pick winners and losers, to allocate success and failure, will not be abused by the people doing the allocating and deciding? The insiders will prosper and everyone else will toil under their yoke.

In Federalist 51, James Madison said:

[quote align=”center” color=”#999999″]

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.

[/quote]

We don’t live in a world of angels, we’ve just become so lazy that we’d rather assume we do than take on the responsibilities of self-governing.

The biggest lesson of the last week isn’t that there are arrogant idiots in government, even if they’re a minority. It’s that no matter how well meaning, no matter how divinely inspired or technically adept and scientifically sound, governance-by-expert is a fallacy. There is no magic mathematical formula or giant computer model that can divine a balance between what the actual people of a nation want and what that nation has. The only system that’s done that is free enterprise: free people making free decisions in a reasonably regulated free market. Everything else has been tried and failed miserably – literally leading to misery.

President Obama, in a moment when he actually said what he meant and not what he though you wanted to hear, famously said that government is the only thing we all belong to. No, government should belong to all of us. We need to take it back, and the first step is to get it down to a manageable size.

Rob Natelson: Three Cheers for Speaker Blasdell and the State House!!! (to which is appended a heads-up from past experience)

Carl Graham and I were in the legislative galleries in Helena last Friday, when the state stepped back from the brink.

Democrats and some Republicans were pushing for the state to yoke itself to the Obamacare Medicaid expansion, enticed by “free federal money.” So they amended a bill designed to keep the state free from the expansion to one chaining the state to the expansion.

The rules of the state House of Representatives generally provide that when the purpose of a bill is changed, it should go back to committee for review. So in a courageous move guaranteed to irritate the state’s “opinion leaders,” Speaker of the House Mark Blasdel decided to just that.

Advocates of the expansion immediately moved to appeal the Speaker’s ruling. All of us in the House chamber held our breaths to see what the roll call vote would be. At the end, the motion to overrule lost—but by the closest margin possible: 50 for, 50 against. Then the bill was physically transmitted to the committee.

At least one, and possibly two, Democrats claimed to have pushed the wrong button while voting, but some Republicans may have made off-setting errors. Anyway, advocates of the extension pushed for a second vote, while hospital lobbyists—eager to pad their employers’ pockets by throwing more people into government dependency—vigorously worked on lawmakers, trying to flip some to their cause. They actually wound up losing people: The second vote to reverse Speaker Blasdell lost 48-52.

Some in the Montana political establishment can be ruthless in finding ways to overrule the state legislature when it makes a fiscally conservative decision. Montana lawmakers have to be careful they are not overruled this time.

For example, in the 1990s, the state House rejected federal funding for a controversial education program. Instead of respecting the legislative will, the governor and superintendent of public instruction decided to thwart it. They arranged for the money to bypass state government and go directly from the feds to local school bureaucrats.

A little later in the decade, Montana lawmakers rejected CHIP, one of those federal health care programs that are (1) promoted as improving access to care but instead (2) always make care more expensive and less accessible. So the Montana state auditor (insurance commissioner) decided to violate a central canon of our constitutional government: He decided, as an executive branch officer, to invade the sole right of the legislature to appropriate money.

First, he threatened insurance companies with prosecution for allegedly breaking regulations. Next, he dropped the cases when the insurance companies handed over large cash payments. Finally, he used the extorted funds to erect the CHIP program himself.

Voila! more dependency, less affordable care, and a new spending constituency.

Montana lawmakers must ensure they are not overridden this time. But if their decision holds, they will have made an important step toward more fiscal sanity and physical health.

Bozeman Daily Chronicle Op Ed: Improve Medicaid Before Expanding It

 

Gov. Bullock waited until nearly 60 of the 2013 legislative session’s 90 days had passed before making a Medicaid expansion proposal that essentially said “do what the feds want.” That’s a wasted opportunity. Since Medicaid rules are made in Washington, D.C., we frittered away a chance to negotiate reforms that could better meet the needs of Montana’s most at-risk population while also being fair to taxpayers.

Continue reading here

Legislature Watching

I’ve been a little out of sorts the past few days with whatever it is that’s making the rounds, but that’s given me a chance to sit and watch the legislature on my fancy computer gadget box in the basement. It’s like magic. The Legislative Services Division has really done a nice job of making information on the 2013 session visible and easily accessible. You can look up bills, find your legislator, watch or listen to hearings and floor sessions, and much more. Kudos to them.

But that’s not what I wanted to talk about. I’m going to be lazy today and just redirect you to some work we’ve already done at MPI on two issues that are currently hot in Helena.

The first is Medicaid expansion. Rob and I have been beating this to death here and here , I know. And you can get all the facts and date you need from our policy note. But you really need to tell your legislators how you feel about creating an entirely new dependency class of young, able, childless adults. The arguments and facts and data are all in the blogs and policy notes we’ve done, but they mean nothing if you don’t show your concern. You can bet the victim industry and hospitals who stand to gain enormously are lobbying the hell out of our reps up in Helena. Somebody’s got to stand up for the taxpayer and for the basic morality of a system that rewards earned success rather than punishes it.

The other hot topic is campaign finance reform. I laid out the argument here that the problem we have isn’t money in politics, it’s politics in money. And so whatever ‘reforms’ we try are for nothing if we don’t reduce the size, scope and power of the government to pick winners and losers. Anything else is putting the cart before the horse. This issue divides those of us on the right and there are legitimate concerns on both sides of the issue. But please take a look at arguments against limiting free speech before letting emotional arguments take the day.

MPI Policy Note 01-13: Medicaid Expansion Can Wait

Proponents of Medicaid expansion argue that it would insure more people, that it takes advantage of “free” federal money and that it will create jobs and pump up local economies. But the fact that barely half the states are taking action to expand Medicaid indicates that this federal giveaway may come with unacceptable risks and costs, including:

  • Expansion will dump more people into a system that provides poorer access to care and poorer health outcomes than private insurance.
  • Federal matching funds are neither free nor guaranteed, potentially leaving the state with an unsustainable funding requirement.
  • Expanding Medicaid without fundamentally reforming it perpetuates its shortcomings and will crowd out other public spending priorities.


There is no cost to delaying, but expansion is forever. This decision should wait until we can learn more.

There are alternatives to Medicaid expansion that will actually provide quality care at lower costs, and without creating an entirely new dependent class of young, able Montanan adults. Our policy note gives you all the information you need to see why and how we should take a pass on expansion and concentrate on true reforms.

Medicaid Expansion Policy Note

Let Other States Experiment with Medicaid Expansion – Part II

Medicaid expansion is supposedly a no-brainer. It’ll provide insurance for a lot low income people. It’s free federal money. And it’ll create jobs and pump up local economies. So why are the 50 states almost evenly divided on whether to take this gift horse or send it out to pasture?

It’s because a lot of governors and legislatures have decided that at best the jury’s still out on whether expansion is a good idea; and more likely it’s a bad idea that will hurt many of the people it’s supposed to help and turn into an albatross around taxpayers’ necks.

I’m open to being proven wrong, but I agree with those who say that Medicaid expansion as laid out in Obamacare is both bad welfare policy and bad economic policy. It’s bad welfare policy because it shifts primarily young, able and to a large extent childless adults into a system with demonstrably inferior access to care, and then traps them there. Forty four percent of the newly eligible would be adults under the age of 34, and seventy five percent would be childless.[i] In addition, a fourth of all new enrollees would be dumped into Medicaid from private insurance plans that almost always provide better access to care than Medicaid.[ii] The difference is in having health insurance versus getting health care.

I have a fishing license. That gives me the right to stand in a river waving my fly rod around, but it doesn’t guarantee that I’ll catch any fish. Same goes for health insurance versus health care. Medicaid recipients encounter barriers to primary care at nearly twice the rate of those with private insurance.[iii] Because of this lack of access to primary care, they then show up in emergency rooms at rates nearly twice those of the privately insured, but sicker and much more expensive to treat.[iv] Shoveling well over 70,000 new Montanans into this system[v] while also decreasing provider reimbursements under Obamacare won’t make access to quality care any easier for these folks or for anyone else in the state.

Medicaid expansion is also bad economic policy. In fact, it’s pure crony capitalism. You can’t swing a dead cat in Helena right now without hitting a hospital or pharmaceutical lobbyist trying to get their surgical gloves into taxpayers’ wallets. Yes, there’s good evidence that the “free” money coming from Washington may create around twelve thousand jobs in Montana; but will those jobs create health benefits that are commensurate with their costs? If not, the money is better left in the private economy where it can be spent more productively. A recent New England Journal of Medicine article said that “Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.”[vi] And anyway, it’d be much cheaper for Montana taxpayers to just put those who are eligible for federal subsidies into the new exchanges and let Washington pay their entire bill. It’s free money, right?

Except that it’s not. It’s taxpayer money whether you write the check to Helena or to Washington. The net cost to Montana taxpayers of Medicaid expansion through 2021 is over $50 million according to one estimate,[vii] and closer to $100 million according to another.[viii] That’s after the “free” money and jobs and tax revenues, and assumes the federal government will keep its promise to cover 100% of expansion costs in the early years and 90% later on, despite the fact that even the President’s own past two budgets included reductions in those commitments.[ix]

In reality nobody knows what it will cost, but there’s precious little precedent for entitlement spending coming in below or even near initial estimates. In 1965 Medicare was estimated to cost $9 billion annually by 1990. The actual cost in 1990 was $67 billion.[x] There’s no reason to think Medicaid expansion estimates will fare any better, and Montana taxpayers would be on the hook for the difference since it’s politically unlikely that these entitlements would be reversed once they’re put in place.

So why not wait a couple of years? Let’s see how things go in California and Illinois and other bastions of state fiscal responsibility, and then take a look at what’s working and what’s not so we can make an informed decision. Or, we could try true reform and turn Medicaid into a system that really does provide quality access to quality care for more people who need it. We’d do that by reconnecting the patient to the provider and the cost to create responsible consumers rather than filtering both the funding and the care through a self-perpetuating bureaucracy. But that’s a topic for another day.

 


[i] The Urban Institute, “Opting in to the Medicaid Expansion under the ACA: Who Are the Uninsured Adults Who Could gain Health Insurance Coverage,” August 2012,  pp. 8-9.

[ii] University of Montana Bureau of Business and Economic Research, “An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy,” January 2013, p. 6.

[iii] 16.3% of Medicaid patients encountered barriers versus 8.9% of those with private insurance. Annals of Emergency Medicine, “National Study of Barriers to Timely Primary Care and Emergency Department Utilization Among Medicaid Beneficiaries,” 2012, p. 4.

[iv] Ibid

[v] Urban Institute, op. cit., p. 18 and BBER, op. cit., p. 7.

[vi] Katherine Baicker, Ph.D. and Amitabh Chandra, Ph.D, The New England Journal of Medicine, “The Health Care Jobs Fallacy, June 28 2012, p. 2435.

[vii] BBER, op. cit., p. 29.

[viii] The Heritage Foundation, “Obamacare and the Medicaid Expansion: How Does Your State Fare?” March 5th 2013, http://blog.heritage.org/2013/03/05/obamacare-medicaid-expansion-state-by-state-charts/.

[ix] Charles Blahous, Mercatus Center, “The Affordable Care Act’s Optional Medicaid Expansion: Considerations Facing State Governments,” 2013, p. 32.

[x] Conn Carroll, The Foundry, “Health Care Reform Cost Estimates: What is the Track Record?” August 4th 2009, http://blog.heritage.org/2009/08/04/health-care-reform-cost-estimates-what-is-the-track-record/.

Rob Natelson: On the Medicaid Expansion—Yes, Montana Should Say No

When the Supreme Court’s Obamacare case was pending, I noticed that while there was a lot of attention given to the individual insurance mandate, there was little discussion of the Medicaid expansion.

The Medicaid extension was the part of the law that sought to force states into signing up for an expensive new program by threatening to cut off all Medicaid funds if they did not.

Whether the individual mandate was constitutional was an arguable question under the Supreme Court’s modern jurisprudence.  (As you probably know, the court’s modern law on federal regulation and spending is largely disconnected from the Constitution’s actual meaning.)

But the Medicaid mandate was different. However, I looked at it—under modern law or the Constitution’s actual meaning—that mandate seemed flagrantly unconstitutional to me. But almost no one was addressing it.

As a result, I authored one of the very few Supreme Court briefs to address the issue in detail. The brief was edited and filed by Dave Kopel at the Independence Institute, where I am also a senior fellow.

Against all popular expectations, we won: By a 7-2 margin, the Supreme Court struck down the coercive portion off the Medicaid expansion. This left the states free to make their own decisions.

A recent MPI post explains why Montana should not sign up for the budget-busting, dependency-creating Medicaid expansion. As if any additional reasons were necessary, health care expert Linda Gorman adds this compelling argument. It’s written for Colorado, but applies to Montana as well.

More On Medicaid Expansion

Had a good time on KMMS this morning talking about Medicaid expansion so I thought I’d jot down a few notes from the show.

If you’re on MPI’s website you’re already active and aware on policy issues so I won’t belabor the point with a lot of background, but in a nutshell the Governor is about to roll out his plan to expand Medicaid as our masters in Washington have directed to include people earning up to 138% of the federal poverty level. That’s a bad idea for several reasons, as I argued in an Op Ed back in January. We’ll have a lot more on this soon, but here’s a quick outline:

  1. It’s bad welfare policy: According to an Urban Institute study that pretty much everyone is using, 43% of those added to Medicaid in MT would be under 35 years old and 75% would be childless. Unless they’re disabled, putting young, unfettered individuals on public assistance without some kind of work or payment in kind system is unfair to taxpayers, creates all the wrong incentives, and traps them in an entitlement web that’s tough to get out of.
  2. Will cost taxpayers more than just the expansion: Hospitals claim it will save taxpayers and those who are privately insured money because putting more people on Medicaid will reduce their unreimbursed or charity care costs. Don’t believe it. In states like Maine where they’ve already been down this road, those costs increased as people moved from private insurance to Medicaid and uninsured numbers remained virtually unchanged. Just think about it: how will adding 50,000 people from an at-risk population (lower incomes equate to poorer health) to a program with low and sinking reimbursement rates save money?
  3. Job numbers are probably overstated: We need to do a little more homework on this – and will – but claims of more jobs from “free” federal money have been wildly overstated in the past and probably are now as well. And besides, as argued in a New England Journal of Medicine paper called “The Health Care Jobs Fallacy,” if the same health care outcomes can be achieved with fewer resources that leaves more for schools, transportation, safety, and other public priorities.
  4. And finally, it ain’t free money: Over 30% of the “free” money will be borrowed by the federal government, and the remaining will either paid for by you on April 15th or come out of other spending priorities. Direct costs to Montana taxpayers of expansion range from $50 million to around $150 million depending on whom you believe, and there are few examples of entitlement program cost estimates being understated. President Obama’s last two budget submissions included increasing the states’ share of Medicaid reimbursements, so talk of 100% federal cost share is doubtful in the future, and so-called circuit breakers that would cancel expansion if the feds renege are meaningless. Nobody is going to take away this benefit once it’s been granted, so let’s wait a couple of years, see how they like it in other states, and then make an informed decision.

The Health Care Debate Debate

I just posted a Medicaid expansion op ed that argues, pretty effectively I think, against Governor Bullock’s plans to expand Medicaid eligibility to 138% of the federal poverty level. Those things are limited to 700-800 words, though, so I couldn’t include anywhere near all of the reasons that this is a bad idea, both for taxpayers and for potential enrollees.

The moral case against expansion is that the preponderance of literature indicates Medicaid patients have worse healthcare access and outcomes than the privately insured.

This is primarily because Medicaid reimbursements often don’t cover provider costs, so fewer providers are accepting Medicaid.
That means Medicaid recipients have insurance but not necessarily care, and so they end up in emergency rooms sicker and with more serious conditions than those with access to care through private insurance. Obamacare’s planned cuts to both Medicaid and Medicare reimbursements will only exacerbate this problem.

A few states like Florida and Rhode Island have tried consumer-driven Medicaid reforms that have actually decreased costs and increased access to care rather than simply drive more people into an unhealthy system. What a concept, except that those options were pretty much cut off from other states under Obamacare.

As for the impact on taxpayers, the Heritage Foundation has a good report for state lawmakers outlining the hidden costs of Medicaid expansion. Give it a read, and then contact your Representative or Senator to let them know how you feel.

And then, if all this piques your interest about consumer-driven healthcare reform, consider that if Switzerland can do it to great effect so can we.

It’s really pretty simple. As a society we’ve made the correct decision that we’re not going to step over bodies on the way to the hospital. So we subsidize those who need it, but we still offer them choices in what care they receive and how they get it. That results in insurers and providers competing for their business, which results in better service, better care, and lower prices. It works for virtually everything else we purchase, so why not healthcare?

Now Is Not the Time for Medicaid Expansion

 Bozeman – Governor Bullock has decided to ignore the Schweitzer administration’s budget submitted last November and instead opt into Obamacare’s Medicaid eligibility expansion. This looks to be a patently bad idea; and even if it’s not there’s no reason to rush forcing Montana’s taxpayers into yet more unsustainable entitlement spending and to herd more of our citizens into a system that provides inferior care at great expense.

First let’s get a little background out of the way and then I’ll explain why it’s a bad idea.

Medicaid provides health insurance – not necessarily health care, but more on that later – to families with incomes up to 133 percent of the federal poverty level (FPL). Montana’s taxpayers currently pay about 33 percent of the program’s cost, with the federal government picking up the balance.

Last summer’s Supreme Court ruling let states decide whether to increase Medicaid eligibility to 138 percent of the FPL, which Obamacare tried to mandate. Many people portray this as “free money” since Washington says it will cover almost all the costs until 2017 and then ramp down to 90 percent of the costs after that. But that promise, like so many others that were made during the health care reform debate, simply doesn’t match the facts on the ground.
These facts argue against expanding Medicaid eligibility for two major reasons, one of them financial and the other one moral.

The financial reason is that we already know this expansion isn’t “free money” for the state. And the moral reason is that it will result in thousands of Montanans being dumped into a system that results in inferior access to care, with many of them forced out of much better private insurance plans.

Estimates of Montana’s potential share of expansion costs vary pretty wildly[i] but most come in between $100 million and $200 million,[ii] or the equivalent of between two hundred and four hundred new teachers, for example.[iii] Our costs increase for a lot of reasons, but I’ll just highlight a few obvious ones.

First, with Obamacare scheduled to cut $8 billion from Medicaid and $500 billion from Medicare, you can be sure that Montana’s health care providers will be coming to taxpayers to be made whole when their costs inevitably outpace their reimbursements under these government programs.

Next, the largest single increase will result from people who are eligible for Medicaid at the 133 percent FPL rate, but not currently enrolled, coming out of the woodwork as word gets out that eligibility has been expanded. Many of these people are technically uninsured today but would be enrolled in Medicaid and receive care if they needed it. Many others, though, have their own insurance and would simply shift from private to public coverage. Since they wouldn’t meet the new 138% FPL threshold, about 33% of their insurance costs would be shifted from them or their employers to Montana taxpayers.

And finally, for anyone who believes that the federal government will continue to reimburse states at the 100 or even 90 percent level, well, I’ve got a bridge to sell you. Washington’s budget woes are going to be transferred to the states, and states like Montana that get from Washington much more than we give are going to feel the pain first and most acutely.

Shifting our most vulnerable population to Medicaid is also immoral. Studies consistently show that Medicaid patients have poorer access to care than privately insured patients.[iv] Since Medicaid typically pays physicians 56 percent of the amount private insurers pay, fewer doctors are accepting new patients and they eventually wind up in hospitals with more serious conditions than those who are privately insured. In addition, there’s scant reliable evidence that Medicaid improves health outcomes at all, and zero evidence that it is the best way to improve health outcomes per dollar spent.

Expanding Medicaid will only worsen our health care system’s woes, increasing costs and decreasing access to quality care while adding a new entitlement burden on taxpayers and dumping thousands of low income Montanans into a failing program. There’s no rush to expand. If it works for other states we can always sign on. But this is one case where we shouldn’t lead with our chin.

Carl Graham is CEO of the Montana Policy Institute
 

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[i] MT Department of Public Health and Human Services, “The Impact of Medicaid Eligibility Expansion and health Montana Kids Monitoring,” 12/2/2011, http://leg.mt.gov/content/Publications/fiscal/interim/financecmty_dec2011/SJ%2026%20ACA%20Medicaid%20expansion.pdf.
[ii] For example, Kaiser Commission on Medicaid and the Uninsured, “the Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis,”  11/2012, http://www.kff.org/medicaid/upload/8384.pdf.
[iii] Derived from data at teacherportal.com, http://www.teacherportal.com/salary/Montana-teacher-salary.
[iv] For a synopsis see The Heritage Foundation, Kevin D. Dayaratna, “Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured,” 11/9/2011, http://report.heritage.org/bg2740.