Archives: January, 2010

Medicaid’s Cash Cab

As Congress hashes out an agreement behind closed doors to expand the government’s role in health care, a Medicaid story out of New York serves as another reminder that government is part of the health care problem, not the solution. Audits released by the state’s comptroller found $169 million in misspent funds, including a $196,000 cab bill for a woman who took a daily $300 taxi ride to visit her son in Albany for three years.

The following are some of the findings:

  • $53 million in overpayments for Medicaid recipients who had multiple identification numbers.
  • $20 million that was nearly spent because the state’s computer system failed to catch a clerical error. Auditors caught it before it was paid out.
  • $5.4 million in overpayments to 10 hospitals that billed for discharging a patient when, in fact, the patient had been transferred to another facility. Hospitals receive higher payments for discharges rather than transfers.
  • $1.2 million paid for services that were not medically necessary or not provided.

According to the state’s comptroller, “[T]he state Medicaid system is leaking millions of dollars… Safeguards designed to protect the taxpayers by detecting waste, fraud and abuse keep failing.” However, this is business as usual when it comes to New York’s notoriously fraud-ridden Medicaid program, as a Cato essay on fraud and abuse in federal programs notes:

The former chief investigator of the state’s Medicaid fraud office believes that about 10 percent of the state’s Medicaid budget is consumed by pure fraud, while another 20 to 30 percent is consumed by dubious spending that might not cross the line of being outright criminal.

A 2005 investigation by the New York Times found remarkably brazen examples of fraud and abuse in New York’s Medicaid. The article noted that the program has “become so huge, so complex, and so lightly policed that it is easily exploited… [T]he program has been misspending billions of dollars annually because of fraud, waste, and profiteering.”

With the massive and complex expansion of Medicaid and other health programs in the pending legislation, we can expect a gargantuan expansion in fraud and abuse. The good news, I suppose, is that the government will need a massive hiring of new health care auditors, which should reduce the nation’s unemployment rate.

For more on fraud and abuse in government healthcare, see here.

New Study Seconds Cato Finding: Immigration Reform Good for Economy

The Center for American Progress and the Immigration Policy Center released a new study this morning that finds comprehensive immigration reform would boost the U.S. economy by $189 billion a year by 2019. The bottom-line results of the study are remarkably similar to those of a Cato study released last August.

Titled “Raising the Floor for American Workers: the Economic Benefits of Comprehensive Immigration Reform,” the CAP study was authored by Dr. Raul Hinojosa-Ojeda of the University of California, Los Angeles.

It finds that legalizing low-skilled immigration would boost U.S. gross domestic product by 0.84 percent by raising the productivity of immigrant workers and expanding activity throughout the economy.

Using a different general-equilibrium model of the U.S. economy, the earlier Cato study (“Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” by Peter Dixon and Maureen Rimmer) found that a robust temporary worker program would boost the incomes of U.S. households by $180 billion a year by 2019.

Both studies also concluded that tighter restrictions and reduced low-skilled immigration would impose large costs on native-born Americans by shrinking the overall economy and lowering worker productivity.

I’m partial to the Cato study. Its methodology is more comprehensive and more fully explained, but it is worth noting that very different think tanks employing two different models have come to the same result: Legalization of immigration will expand the U.S. economy and incomes, while an “enforcement only” policy of further restrictions will only depress economic activity.

If Congress and President Obama want to create better jobs and stimulate the economy, comprehensive immigration reform should be high on the agenda.

A Double Dip for Housing?

Washington is fretting this week over news that mortgage applications fell dramatically in November. Coupled with earlier indications of renewed softening in the housing market, there is growing fear that housing is headed for a “double-dip downturn” that could further damage the economy. As a result, Federal Reserve policymakers are considering additional stimulus, while the National Association of Realtors is suggesting an(other) extension of the “temporary” homebuyer tax credit.

Remarkably, neither policymakers nor the media are asking the obvious question: Given all of the emergency interventions in housing that government has undertaken, and the fact that the housing market continues to erode, do such interventions do much good?

Since the bursting of the bubble in 2006, the great unknown has been whether housing prices will revert to their historical trend (and possibly to below trend for a short period), or stabilize at some permanently higher level because a portion of the bubble (aided perhaps by public policy) would prove enduring. There is good reason to expect reversion to trend, but the economy can surprise us.

Let’s use an example to understand this better. The graph below depicts the course of house prices for my hometown of Hagerstown, MD, an area within commuting range of suburban DC that was hit particularly hard by the bubble and its deflation. The black line is a house price index computed by the Federal Housing Finance Agency for 1989–2009. The red line is an extended linear trendline drawn using index data from the period 1989–2002. (You can do the same analysis for your area using these FHFA data.) The question, then, is whether house prices will fall all the way back to the trendline or will stabilize at a level above the trendline. 

Figure

The sharp downward slope at the end of the price line and  the latest housing news suggest that Hagerstown is destined to revert to trend (perhaps after a period below trend). I’ve drawn similar figures for several other locations and they show similar patterns. It looks like the nation’s housing markets, for the most part, are reverting to trend.

When this crisis first began in 2007, Bush administration officials vowed to “stabilize house prices at the highest possible level.” However, despite their efforts and those of the Obama administration, Congress, and the Fed,  reversion to trend appears inevitable. At best, those efforts may have slowed the reversion — in which case, I suppose the Bush goal has been met.

It can be argued that a gentler reversion to trend may be more tolerable than a sharp return. On the other hand, there are fears that a lengthy softening of the housing market will lead to more defaults, less worker mobility, continued weak consumption, and a long period of high unemployment and stagnant wages for those who are working. Perhaps a sharp return would be the quickest way to shed the ill effects of the bubble.

This leaves us with a final question that policymakers, the media, and the public should be grappling with: If all of these emergency housing interventions only result in a slower reversion to trend, then is that benefit worth the cost?

Los Angeles Crime Rate Declines Again Despite Complaints about Immigrants

One of the more common complaints I hear about illegal immigration is that low-skilled workers from Mexico and Central America allegedly bring with them a wave of crime and incarceration expenses, especially to southern California.

Those complaints are hard to square with the mounting evidence that immigrants, even low-skilled, illegal immigrants, are no more prone to commit crimes than native-born Americans. The latest data point comes from Los Angeles, where the Wall Street Journal reports this morning: “Violent crime in Los Angeles hit its lowest level in more than half a century last year, one of a growing number of U.S. cities reporting its streets were remarkably safe in 2009.”

I tried to connect the dots on immigration and crime in a recent article I wrote for Commentary magazine, titled “Higher Immigration, Lower Crime.” My conclusion was entirely consistent with the latest crime report from Los Angeles:

As a rule, low-skilled Hispanic immigrants get down to the business of earning money, sending remittances to their home countries, and staying out of trouble. In comparison to 15 years ago a member of today’s underclass standing on a street corner is more likely waiting for a day’s work than for a drug deal.

WaPo: Too Dismissive of Privacy Concerns

The Washington Post writes, “There’s nothing to fear from the use of full-body scanners at airports.”

That’s a little too dismissive. While it’s true that TSA has done much to limit the privacy threats, this is a fundamentally invasive technology.

I was particularly struck by this doe-eyed argument: “Officers in [the] remote screening room are prohibited from bringing in cellphones, cameras or any device with a camera.”

Here’s how I wrote about the fate of that rule in an earlier post:

Rules, of course, were made to be broken, and it’s only a matter of time — federal law or not — before TSA agents without proper supervision find a way to capture images contrary to policy. (Agent in secure area guides Hollywood starlet to strip search machine, sends SMS message to image reviewer, who takes camera-phone snap. TMZ devotes a week to the story, and the ensuing investigation reveals that this has been happening at airports throughout the country to hundreds of women travelers.)

My error was to say it would be SMS. In the Washington Post’s account, TSA screeners communicate by wireless headset. (I don’t remember how they communicated in the demonstration I saw in Detroit.)

In college, I worked at a bar, and at the door of this bar it was customary to say at appropriate moments, “Did you get those books?” or “Did you get that book?” Everyone knew what these phrases meant and trained their eyes accordingly. I’m sorry if that was crude.

I’m more sorry if nobody on the editorial board at the Post recalls the vigor and ingenuity of youth. There is not “nothing to fear” from the use of full-body scanners.

Blasphemy Laws Are an Admission of Failure

The Washington Post feature “On Faith” today discusses Ireland’s new, profoundly misguided blasphemy law. Blasphemers there can now be fined up to $35,000. That’s a lot of money for a few little words.

Atheist Ireland is testing – and protesting – the law by publishing blasphemous quotations like the following:

“Thou hast said: nevertheless I say unto you, Hereafter shall ye see the Son of man sitting on the right hand of power, and coming in the clouds of heaven.”

“Ye are of your father the devil, and the lusts of your father ye will do. He was a murderer from the beginning, and abode not in the truth, because there is no truth in him.”

“May Allah curse the Jews and Christians for they built the places of worship at the graves of their prophets.”

“Show me just what Muhammad brought that was new and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached.”

They are, respectively, from Jesus, Jesus, Muhammad, and Benedict XVI.

Maybe it’s an American thing, but the Post apparently couldn’t find any panelists to defend the law. These folks are all professional wordsmiths, of course, and these tend to be most supportive of the freedoms that they depend on the most. As I noted in my recent Policy Analysis, those who are most easily offended, and who value free speech the least, tend to gravitate not to newspapers, but to governments (and university administrations). That’s where the power is.

Susan Jacoby, for whom I have the utmost respect, even calls the law Pythonesque, likening it to the Ministry of Silly Walks. Of course, there’s this as well:

Blasphemy laws are oddities, because they concede an awful lot of emotional power to the blasphemer. They tell the world: My feelings are so very fragile. Or perhaps they say: My god is so very weak – so weak that he needs state protection against other gods, or even against mere potty-mouthed humans. Either way, it’s an embarrassing admission, but hardly the business of government. If your god can’t take the heat, he’s hardly a god at all.

Jesus and Mo put it very well indeed: