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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.

Montana Public Radio Commentary: The Courtier Society

By: Carl Graham, CEO, Montana Policy Institute

Thanksgiving always reminds me of an old Twilight Zone episode where the aliens show up in sparkly robes with gleaming big eyes and smiles all around. Their elongated fingers carry a book called “To Serve Man,” which everyone naturally assumes is a primer for saving us silly humans from our own ignorance and evil natures. This is during the Cold War, remember, when we all assumed we were going to blow each other to smithereens at any moment.

Naturally the best and the brightest humans start lining up for a trip to the home planet where further enlightenment undoubtedly awaits and a select few will be chosen as mankind’s benevolent overlords. It’s for our own good, of course.

Unfortunately, “To Serve Man” turns out to be a cookbook and the best and brightest are on the menu instead of the guest list.

Maybe it’s just the Thanksgiving tryptophan talking, but I think that’s where this country is headed as people and businesses line up for special treatment from an increasingly centralized and powerful government. At some point they’re going to find out that they’re dinners instead of diners.

We’re already seeing the increased influence exerted by just a few large special interests with access to political power resulting in more restrictions, regulations, and costs that disproportionately fall on small businesses and families, whose voices and opportunities to pursue happiness have grown relatively weaker in the process.

I could give you any number of examples, but let’s just use one that everybody has seen in the papers. The Dodd/Frank banking reform law was passed in the wake of a financial crisis that resulted in taxpayers bailing out big banks to the tune of billions of dollars and looking for someone to blame. Although many of its rules are still being written, we already know that the law includes massive increases in compliance, insurance and capital costs for banks, along with giving politically favored large institutions a de facto “too big to fail” designation.

It’s a law that was written for big bankers by big bankers. They can absorb the increased compliance costs while small banks with much lower margins can’t. They can meet the capital and insurance requirements that stifle small banks’ ability to make local loans to farmers and homebuyers. And of course with an implicit government guarantee, big banks enjoy much lower borrowing costs than small banks giving them even more of a competitive advantage.

The result is that we will soon see our community banks – those that survive anyway – become nothing more than storefronts and loan processors for the “too big to fail” banks that the government has chosen to guarantee. Decisions will be made based on checklists developed in New York and Washington D.C. rather than on personal relationships and local knowledge. Loan proceeds will be shipped out of the state and the big banks will increasingly feed the revolving door of the regulated and regulators until only those that can maintain their political access survive. Consumers will have fewer choices with higher costs, and will have to tailor their lives to meet one size fits all requirements if they want mortgages or small business loans.

But that’s not my point.

My point is that by massively centralizing and expanding government power we’re creating a courtier society, one where access to the King’s court is more important to success than merit or effort or risk taking. Now of course I’m not saying we’re creating a monarchy, but the effect is the same when power, influence and success come from proximity to the levers of power rather than from working hard and taking risks. The politically connected will always have access to power, and so the greater that power the more they will succeed at everyone else’s expense.

The result of this centralization and expansion of power is the systematic elimination of small business in this country. The barriers to entry are becoming so high and the cost of complying with regulation so onerous that would-be entrepreneurs are increasingly unable to make any return on their investments or even go about their daily business without risking fines, penalties, or jail.

Many existing businesses will simply close up shop as regulations and reporting requirements become too expensive or difficult to comply with. Job growth will dry up – especially at the low end of the income scale – as the costs of hiring new employees increase and government becomes a competitor for labor with new and expanded entitlement programs. New entrepreneurs will increasingly look at the barriers to entering the marketplace and the myriad of obstacles erected in their path and just go do something else. The risks and rewards of starting a new business will just not be worth it, especially if their success will be demonized in the increasingly popular political tactic of class warfare.

In a courtier society power is centralized and only that power decides who succeeds and who fails. Decisions are made based on proximity to the throne rather than merit, effort, or even the law. That is the direction we are headed as government becomes increasingly centralized, large, powerful and arbitrary.

The end of this path lies in a business/government partnership where large corporations operate under the umbrella and the thumb of government, and people trade their freedom for a monthly check. There’s a name for that, but I don’t want to be incendiary on this special holiday. Just take a look at Italy in the 1920s for a good example.

And have a Happy Thanksgiving while we still have much to be thankful for.

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For Immediate Release
930 Words

Carl Graham is CEO of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.
He can be reached at:
67 W. Kagy Blvd., Ste. B
Bozeman, MT 59715
(406) 219-0508
cgraham@montanapolicy.org

Montana Taxpayers Foot the Bill for the Public Sector Pay Premium

By Glenn Oppel, Policy Director, Montana Policy Institute

In a year when most state legislatures were engaged in budgetary belt-tightening, Montana Governor Brian Schweitzer and public employee union representatives agreed to a pay plan package that would make any private sector worker envious. According to the agreement, each of the next two years state workers would receive both a five percent raise in pay and a 10 percent increase in the state contribution toward health insurance premiums. The price tag is estimated at $138 million.

After the pay plan agreement was reached, a local representative of the American Federation of State, County, and Municipal Employees (AFSCME) argued that it was necessary to “bring us closer to being compensated fairly with those in the private sector.” Union representatives would have the public accept as conventional wisdom their caricature of the underpaid public employee, but the data suggest that public employees are actually compensated far more generously than their private sector counterparts.

Public sector unions have a vested interest in advancing the myth that they’re undercompensated, as it gives them more power at the bargaining table. But state analysts tasked with comparing public and private pay have been encouraging it, also. In June 2012, legislators on the Legislative Finance Committee received a report outlining the results of the State Human Resources Division’s biennial salary survey. Salary data culled for the survey is used to determine what the state calls the “market midpoint” of compensation for 750 occupations within state government. According to the salary survey, state workers are earning on average 13.3 percent less than the market midpoint.

The state analysts are far more likely to shoot straight than AFSCME’s research shop, but their salary survey unfortunately suffers from a weakness in methodology. By relying on salary ranges for occupational categories, the state’s report has grossly oversimplified the compensation question. For instance, many positions in the public sector, such as correctional officers and fire fighters, have no private-sector equivalent. Additionally, employees within these categories are not interchangeable; some are more educated, some are older, some are more experienced. Comparing only occupational categories ignores all of this variation.

A final shortcoming in the salary survey is that it doesn’t include the value of employee benefits – health insurance, paid leave, pension, etc. – which make up a considerable portion of any worker’s compensation.

In sum, merely matching a state job to an occupational category will not yield apples-to-apples comparisons with private sector occupations and compensation. This is an argument that both conservative and liberal analysts have agreed with when analyzing compensation in the public and private sector.

To facilitate a more accurate comparison, the Montana Policy Institute has released a report that uses the “human capital” approach to achieve apples-to-apples comparisons between public and private sector pay. Our report starts by using government data to compare public and private employees of similar personal and professional characteristics. For instance, instead of comparing pay in broad occupational categories, we compare public and private employees of similar work experience, education, gender, race, and disability status. Additionally, we calculate the annual compensation value of fringe benefits on top of annual wages, including pension, paid leave, and health insurance (including retiree health).

The results of the analysis are telling. Whereas the state’s salary survey concludes that that average state employee is earning 13.3 percent less than the market midpoint, our report shows that after adjusting for age, work experience, education, gender, race, and disability status, state and local public employees are in a statistical dead-heat with their private sector counterparts in terms of take-home pay. Where state and local public employees surpass private sector workers in total annual compensation is from their various fringe benefits. When compensation from fringe benefits is factored in, state and local public employees earn nearly 15.4 percent more in total annual compensation than comparable private sector workers.

Last session, lawmakers didn’t act on the previously-negotiated pay plan, citing concerns over revenue forecasts and challenges faced by private sector workers. With fiscal analysts projecting a $457 million surplus, union representatives will lobby vociferously this coming session for some follow through from legislators. Half a billion dollars seems like a lot of extra money, but our fiscal house is not exactly in order. As the Montana Policy Institute details in another study on Montana’s budget, there are long-term structural deficits that could break the bank in the near future, including unfunded liabilities of $3.8 billion in its pension programs for state workers and teachers.

This fiscal sleeping giant, and others, should be priority number one for lawmakers, and true solutions could easily consume whatever surplus materializes.

 

In the Media:

Great Falls Tribune: http://www.greatfallstribune.com/article/20121112/OPINION/311120020/Montana-s-public-employees-earning-more-than-private-sector-counterparts

Missoulian: http://missoulian.com/news/opinion/columnists/state-public-employees-earn-more-than-private-sector-workers/article_9704997e-2f34-11e2-9530-0019bb2963f4.html

Havre Daily News: http://www.havredailynews.com/news/montanapublicemployeesearnmorethanprivatecounterparts.html

KGVO Missoula: http://newstalkkgvo.com/montana-public-workers-earn-more-than-their-private-sector-counterparts/

MTPR Evening Edition Commentary: http://www.mtpr.org/podcasts/audio/mtee_newscasts/11-15-2012Newscast.mp3 (at 20:30)

Montana Watchdog: http://watchdog.org/61693/oppel-montana-public-employees/

Media Trackers: http://montana.mediatrackers.org/category/analysis/

UnionWatch.org: http://unionwatch.org/union-watch-highlights-102/

Montana Public Radio Commentary: Philosophies on Philosophies

Philosophies on Philosophies

By: Carl Graham, CEO, Montana Policy Institute

With stimulus packages apparently designed to just stimulate government growth, “Quantitative Easing” that’s only inflating the next bubble, and institutionalized denigration of those holding differing opinions passing for political discourse, maybe it’s time to say a few words about central planning.

Huh? What the heck does central planning have to do with any of that stuff?

Well, it’s a good representation of those differing opinions that many of us have. It exemplifies the difference in philosophy between those who think government is the only thing we all belong to, and those of us who think government actually is the only thing that belongs to all of us.

Let’s face it.  Some people want to be planned for.  They like having membership in a club that can make the tough calls, do the intellectual heavy lifting, and take the heat for our collective misdeeds.  They’re willing to give up some latitude in their lives to not have to make those hard decisions, or maybe they think there are enough others out there who are incapable of making good decisions that somebody should help narrow their options.  And of course there’s no shortage of people who think they have all the answers and gee wouldn’t we all be better off if they could just impose their ideas on the rest of us in the form of central planning. It’d be so much more efficient and, even if a few eggs get broken it’ll still be a better omelet.

But history is littered with failed attempts by states (or more accurately elites) to centrally plan all or significant portions of economies.  From the French Revolution to socialism to communism, to even Plato’s philosopher king, elites have tried to tie all the pieces of society together in a way that provided for everyone by dictating the types and amounts of things (materials, ideas, labor, etc.) to keep the machine running.  All failed spectacularly.  Well, Plato’s wasn’t really tried but come on; can you really see your old philosophy professor with the pony tail and bong blisters in charge?

These attempts were all cloaked in good intentions but failed out of a combination of hubris and indifference: someone assumed they could know the unknowable about what people wanted and needed, and what it would take to provide all of those things in the right quantities and at the right places and times.  And because enough people didn’t demand the right to make their own decisions the ruling elites were able to use powerful and centralized governments to impose their “solutions.”

Let’s see: bank lending requirements, pay caps, government-run healthcare, mass subsidies, auto bailouts…the list is growing of things that someone somewhere thinks they know more about than millions of free people making free decisions about how best to allocate their resources to pursue their own happiness. As more and more decisions and resources are centralized in Washington, the gap between haves and have-nots is being replaced by a growing gulf between those who get to make decisions about we’ll live our lives, and those of us who have live with those decisions.

And that is why, I think, we’re seeing denigration passing for opinion and demonization passing for discourse. The stakes have never been higher, and there are two broad camps out there with fundamentally different visions of what this country should look like– both with strong historical philosophical roots and legitimacy. But both can’t be right, at least not at one time in one place.

I’m getting quite tired, for example, of hearing that those on the Left are stupid, uninformed, or evil.  Some certainly are some or all of those things, as are some on the Right. But just like ignorance, racism and extremism don’t define the vast majority of those on the Right; stupidity and malevolence don’t define the activating forces behind those on the Left.

Ignoring the vast malleable center for the moment – which we generally do anyway except at election time – most people fall into one of two camps, both of which have long philosophical pedigrees and solid ideological underpinnings.

Folks like me who believe that freedom and happiness flow from natural rights and having choices in our lives too often fall into the trap of casually dismissing as useful idiots or miscreants those who believe that rights are granted by governments which are in turn best led by intellectual elites attuned to the needs of the times.

It’s not necessarily gullible or malevolent to believe that some set of experts are better at adapting to the times than individuals and so they should be in charge for the betterment of us all.  It sounds nuttier than a Planters Peanut factory to me, but it’s not an illegitimate view and it should be argued against, not belittled.

Likewise, many on the Left generally dismisses the new grassroots conservative movement as not worthy of their derision and so fall back on manufactured stereotypes of racists and bumpkins to explain any popularity and successes these groups attain.

What many on the Left don’t understand is that there are sound ideological and philosophical underpinnings to conservative values as well. Founding principles and religious values are legitimate in the mainstream, and so the people who hold them must be tarred with illegitimate caricatures of bigotry or ignorance to marginalize them. That is, or should be, insulting to honest people on both sides of the argument.

The thing is, if we don’t understand our opponents’ philosophies and what goes into their assumptions how can we tailor our arguments to oppose them and expose their fallacies?  And if we take the intellectually lazy position of ascribing ill intent or ignorance rather than understanding their arguments then we miss an enormous opportunity to debate issues on the strengths of our own arguments.  We’re seeing too much of that now, where informed and interested people are calling each other playground names instead of trying to persuade each other and educate those around them.

We would do our political system a favor, and maybe we could get back to watching boring beer commercials for a while if we spent a little more time listening and a little less time calling each other names.

–end–

The Flaw of Unintended Consequences

By: Carl Graham, President, Montana Policy Institute

Epiphanies are rare, especially those of the mass variety. More people are opening their eyes, though, to the fact that actions, even well-meaning ones, do have consequences; most of them unintended, and many of them bad. So begins our climb back up to the shining city on the hill.

What Frederic Bastiat called “The seen versus the unseen” is being seen by more and more people. Our tendency towards feel-good short term policy solutions has resulted in unsustainable and, more importantly, unfair and even immoral costs that are often borne by those we’re trying to help. We could fill a book with examples, but here are just a few.

Take the minimum wage…please. It’s basic economics that if you increase the price of something people will buy less of it. That applies to labor as much as it does to, oh I don’t know, let’s say grapefruit. Except that since most grapefruit are interchangeable the decreased demand applies to all of them equally. Not so with the minimum wage. People at the lower end of the wage scale are predominantly young, less educated, unskilled, and minorities. If you arbitrarily raise the cost of hiring them, it’s just simple logic that fewer will be hired since not all of them can add as much value to a product or service as the minimum wage that’s set. So we’ve seen teen unemployment rise to about 27% overall and to almost 50% among blacks. We’re basically telling these young people that their labor is worth nothing if it’s not worth some government-mandated cost of hiring them. That’s a tragic waste and lost opportunity. And it’s flat immoral to tell someone they have zero value to society if they can’t contribute at some arbitrarily set level. I have a hard time believing that’s what minimum wage proponents intended, but that’s the consequence.

Speaking of government mandates, the U.S. Constitution names three federal crimes: treason, piracy, and counterfeiting. Everything else is left to the states. And yet there are about 4,500 federal crimes spread out among some 27,000 pages of federal code. If all we had to keep track of were the Constitutional three plus state laws we’d probably be fine. Except what would lawmakers in D.C. have to do if they didn’t make laws, or more accurately, make outlaws out of all of us? It’s been estimated that the average professional commits as many as three crimes a day without even knowing it.(1) According to a recent Wall Street Journal article, federal prosecutions have gone from fewer than 200 per million U.S. adults in 1980 to nearly 400 in 2009.(2) The sheer mass of federal code has unintentionally made criminals out of all of us since we can’t possibly know everything they tell us to do and not do in our everyday lives. Unintended? Maybe. Consequential? Ask someone who’s in prison for violating a law they didn’t know existed.

How about housing regulations? Codes, zoning, and other mandates add about 25% to the cost of a new home.(3) No matter how well intentioned, increasing costs by a fourth will hardly result in affordable housing or high-paying construction jobs. We see the uniform architecture and well-ordered streets. What we don’t see are people priced out of the market and workers unable to feed their families.

And finally, the mother of all unintended consequences: health care “reform.” Here’s just one example. The National Federation of Independent Businesses reports that 57% of small businesses may drop employee health care coverage because of the new law.(4) Despite repeated promises that “you can keep your current coverage if you like it,” your coverage doesn’t have to keep you. Turns out it’s cheaper for both employers and employees to move workers to federally subsidized exchanges and have taxpayers foot the bill. I’m not so sure that was unintended, but it’s definitely a consequence.

What’s unseen is more important than what’s seen because it’s often felt by those least able to influence policy, and its effects last much longer than the immediate gratification of doling out favors at somebody else’s expense. So epiphanies are good; especially those that encourage people to make rational decisions based on all costs and all benefits, both seen and unseen.

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For Immediate Release

704Words

 

Carl Graham is president of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.

He can be reached at:

67 W. Kagy Blvd., Ste. B

Bozeman, MT 59715

(406) 219-0508

cgraham@montanapolicy.org

 

Notes: (for ed. use)

(1) http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594032556

(2) Wall Street Journal, “More are Ensnared By Criminal Laws,” p. A1, 7/23/2011

(3) National Association of Home Builders, “High Regulatory Costs for New Homes Another Obstacle to Housing Recovery, Study Finds,” http://www.nbnnews.com/nbn/textonly/2011-07-25/front+page/index.html

(4) Wall Street Journal, “The Flight to the Exchanges,” p. A12, 7/25/2011