Montana’s Lagging Ways

11-12 Tapping Capitalism V5comp slides

Take a look at the link that’s right above this post. It’s a pdf of three state comparison slides that we’ve been using to demonstrate the real problem Montana has with economic development. What it shows is that, while Montana consistently ranks middle of the road in economic and demographic comparisons nationally, we’re at the bottom of the pack when compared to the states around us.
If we want to fund legitimate government needs we need economic growth and jobs. If we want people to be happy and reach their potential we need to give them the opportunity for earned success. We’re lagging our neighbors in virtually all of these measures because of policies that have been put in place that may have been well-meaning at the time but that remove options and retard growth in the long term. We’re now reaping the ‘rewards’ of those policies through low wages and high unemployment compared to our neighbors.
The problems are many and the solutions are difficult. But they just grow and get more difficult the longer we wait. Here are a few things the legislature and governor should do yesterday to return Montana’s competitiveness and allow our citizens to pursue happiness and reach for their potential:

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  • Labor Reform: Become a right to work state, become an ‘at will’ state, and bring the minimum wage back to federal levels
  • Budget Reform: Reform our state budgeting process so that we spend based on priorities rather than politics
  • Legal Reform: Reform our liability system to decide based on rule of law rather than preferred outcomes of specific cases. This is the biggest single impediment to businesses and job creators coming into the state. If they can’t estimate their future liability risks they’ll move on to someplace where they can
  • Pension and Pay Reform: Most state employees are not overpaid, but too many have migrated into higher pay bands over the past ten years while lower paid workers have been left behind. Our pension system is $10 billion underfunded. Without true reform we won’t be able to keep the promises we’ve made to our public employees.
  • Land Use: The federal government owns about 30% of Montana’s lands and is increasingly trying to regulate the rest. We should decide what happens in Montana and we are capable of regulating responsible development, whether it’s in agriculture, resources, or recreation.
  • Health Care: Obamacare will raise health care costs and decrease access to quality care. We need to implement consumer-driven reforms that allow patients and doctors to make responsible decisions rather than being dictated to from Washington.
  • Education Reform: Our education funding system is a mess and our rules don’t allow parents, teachers, and students to innovate and ensure each student gets the best possible education. We need choices and new thinking, not just more money thrown at the problem.
  • Government Transparency and Accountability: Taxpayers have a right to know how their dollars are being spent and what’s being done in their names. We need the state to post spending, actual spending not just projected budgets, so that each Montanan can be a citizen watchdog and a responsible part of the process. Senator Taylor Brown has a bill to do just that. Take a look at it and tell your legislators and the governor what you think.

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That’s a pretty good start and what MPI will be working on to make Montana competitive again, but mostly to provide each of us the opportunities that free people deserve.

 

Baseline Budget Better Than Base-Bloated Budget

This is a good development.

The “Present Law” budget that is the normal starting point for building a new biennial budget is basically the previous one plus an inflation factor plus a case load factor, plus any changes that were required during the biennium plus…, well you get the idea. The result is that it guarantees the starting point for a new budget is larger than the old one, and any reductions in that budget are treated as cuts, even though the actual spending amount is probably more than last year’s. That’s just dishonest.

The feds do the same thing. They budget a billion dollars for a program to search for green cheese on the moon and then ‘cut’ that program and claim a billion dollars in savings even though it had never been spent before and nobody ever really intended it to be spent in the future. It’s purely political gamesmanship meant to allow politicians to claim they cut spending when in reality they probably raised it.

So…when someone says they’re making a cut to the budget be sure to ask them if they’re cutting hypothetical spending or if they’re actually cutting spending, i.e. will this year’s spending be less than last year’s. And then watch as they take out their hanky and explain how complicated the whole process is and that you should just take their word at face value.

Even baseline budgeting doesn’t solve the problem of waste, though. It assumes, for example, that every nickel spent last year was both efficiently and effectively expended. That’s not necessarily the case. The real answer is performance-based budgeting, which allocates dollars based on a program’s demonstrated ability to achieve agreed-upon government missions and functions, and then prioritizes available dollars to get the biggest bang for the buck. In short, it’s how you and I allocate our spending every day. You can read a lot more about it, along with a pension system primer and tax analysis in our new Budgeting For Results study.

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.