WSJ: Medicaid Ripe for Welfare-Style Reforms

Medicaid is a large government program that provides medical care and nursing home services to millions of needy Americans.  And probably to millions of non-needy Americans as well.  Each state runs its own separate Medicaid program.  About half the funding comes from the states and half comes from Congress – which means that neither really owns the program, and explains why Medicaid is rife with waste and fraud.

Earlier this week, a Wall Street Journal editorial explained how one variety of Medicaid fraud works:

The swindle works like this: A state overpays state-run health-care providers, such as county hospitals or nursing homes, for Medicaid benefits far in excess of its typical rates. Then the federal government reimburses the state for “half” of the inflated bills. Once the state bags the extra matching funds, the hospital is required to rebate the extra money it received at the scam’s outset. Cash thus makes a round trip from states to providers and back to the states – all to dupe Washington…

The right word for this is fraud. A corporation caught in this kind of self-dealing – faking payments to extract billions, then laundering the money – would be indicted. In fact, a new industry of contingency-fee consultants has sprung up to help states find and exploit the “ambiguities” in Medicaid’s regulatory wasteland.

The Journal argues that the only way to rid Medicaid of such fraud is to reform the program as Congress reformed welfare back in 1996:

A reform alternative would be for the government to distribute block grants, rather than a set fee for every Medicaid service. That would amputate Washington from state accounting and insulate taxpayers from these shakedowns. States would have an incentive to spend more responsibly, and also craft innovative policies without Beltway micromanagement. 

I’ve advocated block grants here, here, and here.  Good to see the Journal grasps something that Republicans apparently cannot.

Why Is The ACLU Joining Media Ownership Hysteria?

Cato has long had a strong relationship with the ACLU, an organization that has been on the forefront of efforts to protect civil liberties and constitutional government. But every once in a while, the venerable public interest organization wanders off the reservation and takes a position that’s unrelated to—if not outright at odds with—civil liberties. We saw a good example of this last week when the group threw its weight behind efforts to repeal the FCC’s absurdly timid deregulation of media ownership rules.

The proposal would allow a newspaper in one of the 20 largest cities to purchase a TV or radio station—but not one of the metro area’s four largest TV stations.  None of the FCC’s other media ownership rules would be changed. In other words, a newspaper would be allowed to buy an also-ran TV station in a cacophonous media market like New York or LA, but the vast majority of cities would see no changes at all.

Yet even that is too much for the ACLU, which issued a press release condemning the changes and urging Congress to roll them back. Unfortunately, the ACLU doesn’t appear to have done its homework, claiming that “Six major companies control most of the media in the country, including the most popular sites on the Internet.” Over at Techdirt, I point out how silly this is:

There’s just no way you can argue that these six companies own “the most popular sites on the Internet.” According to Alexa, most of the top 10 sites are owned by Google, Yahoo, and Microsoft, all independent companies. Only MySpace, recently acquired by News Corp., is in the top 10. But maybe she meant the top 10 media companies? Well, a good source for the sites most discussed in the blogosphere is the Memeorandum Leaderboard. Three of the top 10 are controlled by the “Big Six”: CNN at #3, the Wall Street Journal at #9 and MSNBC at #10. Four others – the Associated Press, New York Times, the Washington Post, and the Atlantic, – are mainstream media outlets not controlled by the “Big Six.” The final three slots are held by the Huffington Post and the Politico (twice), pure Internet publications not owned by the “Big Six.”

Indeed, the whole idea that “six major companies” are gaining monopolistic control over the media marketplace doesn’t make sense. There are, in fact, a ton of independent media companies. In addition to the New York Times and Washington Post companies, there are other big, independent newspaper chains like the Tribune Company (owner of the LA Times and Chicago Tribune) and Gannett (owner of USA Today and numerous other papers). There are foreign outlets like the BBC and the Guardian. There are magazine publishers like Conde Nast, book publishers like Pearson, and music publishers like EMI. The “Big Six” own a lot of media outlets, to be sure, but it’s a big world, and there is no shortage of prominent media outlets that aren’t controlled by these major players. And as media critic Ben Compaine has documented, the media marketplace has barely gotten more concentrated at all in the last couple of decades. For example, between the mid-1980s and the late 1990s, the market share of the top ten media companies increased from 38 percent to just 41 percent. More importantly, there’s been a lot of turnover. The list of top media companies in 1988 would look very different from today’s top ten list. In short, there’s no real problem here.

The ACLU is a key ally in the fight to hold the Bush administration accountable for trampling civil liberties and the rule of law. Given the enormity of that fight, it’s troubling to see them divert scarce resources away from civil liberties—supposedly their raison d’être—to advocate more government regulation of private media outlets.

E-Verify Debunking Exposes Debunking Errors

Congratulations are due once again to the Department of Homeland Security for engaging in open dialogue about its programs, even controversial ones like “E-Verify” – a system that Congress may require all U.S. employers to use for running federal background checks on every single new employee.

Openness is healthy, and the comments to a recent post on E-Verify by my old friend DHS Assistant Secretary for Policy Stewart Baker are poking some holes in his somewhat facile analysis. I’ll weigh in with a little more, based mostly on my recent paper “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration.”

Baker says that critics claim the error rate in E-Verify is as high as 4% and will lead to millions of Americans losing their jobs by mistake. To refute this, he points to a study commissioned by the Department of Homeland Security showing that 94.2% of new hires in a sample of 1,000 E-Verify queries were automatically verified, 0.5% resolved a mismatch, and 5.3% received a final nonconfirmation (that is, they either didn’t try or couldn’t challenge the finding that they were ineligible for employment under U.S. immigration law).

Unfortunately, Baker doesn’t point to the actual study. He just links to a picture of a conclusion from it, so we can’t do much to analyze these figures. If these are the results from reviewing only 1,000 new hires by current E-Verify users, that is far too small a sample and too skewed a group to reflect what would happen were the program taken national.

And he concludes: “Of the thousand, 942 are instantly verified. Instant verification of legal workers surely can’t be an error.” Of course it can! Any number of the 942 might have been illegal immigrants who submitted the name and Social Security Number of a legal worker to the employer.

But putting Baker’s glib, erroneous conclusion aside, I believe the 4% figure cited by critics is not about today’s small E-Verify program. It’s the error rate in the Social Security Administration’s Numident database found by the SSA’s own Inspector General (and it’s 4.1%!). Simple math suggests that this would produce a tentative nonconfirmation in 1 out of 25 new hires in the country were E-Verify to go national.

In fairness, that simple math may actually be simplistic – perhaps some cohorts have higher error rates and others lower. We know, for example, that naturalized citizens suffer error rates in the area of 10%. Perhaps older citizens that are leaving the workforce have higher error rates, leaving a lower error rate among current workers. And over time, the error rate would drop as workers were sent from their jobs to Social Security Administration offices trying to get their paperwork in order. (Put aside for now that the SSA takes more than 500 days to issue disability rulings.)

Baker’s conclusion that the 5.3% of workers finally nonconfirmed are illegal workers is without support. The statistic just as easily could show that the 5.3% of law-abiding American-citizen workers are given tentative nonconfirmations, and they find it impossible to get them resolved. More likely, some were dismissed by employers, never informed that there was a problem with E-Verify; some didn’t have the paperwork, the time, or the skills to navigate the bureaucracy; and some were illegal workers who went in search of work elsewhere, including under the table.

American workers pushed out of the workforce by E-Verify – Baker treats it as “common sense” that they’re illegal aliens, and he doesn’t look any further. The E-Verify program does the same - it has no system for contesting or appealing final nonconfirmations.

With his post, Secretary Baker has only raised the question of error rates in E-Verify. There are many sources of error in a system like this, and making it bigger would reveal more. Just because you have a glass coffee table, that doesn’t mean you can build a glass sundeck.

And we shouldn’t take our eye off the ball. “Mission creep” is a governmental law of gravity. Once in place, a national E-Verify system would be used to give the federal government direct regulatory control over law-abiding Americans. Federal authorities would use it to control not just work, but housing, financial services, and access to alcohol, tobacco, and firearms – for starters. Secretary Baker himself recently suggested using a national ID to control our access to cold medicine. The list of things his successors might do is endless.

Fannie Mae’s Rent-Seeking Empire Expands

Jeffrey Birnbaum, who covers lobbyists for the Washington Post, reports:

Lorraine A. Voles, until recently communications director for the congressional office of Sen. Hillary Rodham Clinton (D-N.Y.), has joined Fannie Mae as a senior vice president.The move is a reunion of sorts. Voles, who was communications director to Al Gore when he was vice president, worked previously at the public relations firm Porter Novelli. There, her boss was Charles V. Greener, who is now Voles’s boss at Fannie Mae.Greener had been the mortgage finance giant’s senior vice president in charge of communications and is now chief of staff to Fannie Mae chief executive Daniel H. Mudd. Voles is taking his old job. Before he joined Porter Novelli, Greener was a spokesman for the Republican National Committee.

That’s right: A former mouthpiece for Clinton and Gore is working quite happily for a former GOP spokesman – for a second time. Only in Washington.

One big happy family here in the Imperial City. Those who are paid to fight the red-blue wars, fight. Those who are paid to lobby both sides against the taxpayers, lobby. And as the McCain campaign is demonstrating, the most effective players can switch roles on a moment’s notice.

It’s relevant to note that Ms. Voles and Mr. Greener are now working for Fannie Mae, one of the most skilled rent-seekers in Washington and a pioneer in hiring top players from both parties. As a Cato study noted a few years ago, “The special governmental links that apply to Fannie Mae and Freddie Mac yield little that is socially beneficial, while creating significant potential social costs.” And as an earlier Cato study (by financial analyst Vern McKinley, now a candidate for Congress) noted, “Fannie Mae and Freddie Mac preserve their privileged status through a multi-million-dollar lobbying effort that includes massive ‘soft money’ campaign contributions and the payment of exorbitant salaries to politically connected executives and lobbyists.” Ten years later, that’s still the bottom line.

No Majority Yet

The banner headline across the top of this morning’s Washington Post is

Obama Takes Delegate Majority

But that isn’t true. As the story itself (and the online headline) correctly said, Sen. Barack Obama is now “claiming a majority of the pledged delegates at stake.” His campaign is doing a great job of getting the media to declare that a “milestone” and a “major victory.” But in fact it tells us nothing we didn’t know already: Obama is ahead of Sen. Hillary Clinton in the race, and it seems impossible for Clinton to catch up. But “a majority of the pledged delegates” is virtually meaningless. There are several kinds of delegates that make up the convention, and you have to get a majority of all the delegates. “A majority of the pledged delegates” is no more relevant than Obama claiming “a majority of the delegates from coastal states” or Clinton claiming “a majority of the white delegates.” (I don’t actually know if either candidate has those majorities.) When Obama produces a list of 2025 delegates pledged to vote for him, it will be time for the Post to drag today’s headline out again.

Nothing to see here, folks. Move along. Just a little campaign bombast.

Give the People What They Want

The latest Rasmussen national survey “found that 62% of voters would prefer fewer government services with lower taxes. Nearly a third (29%) disagrees and would rather have a bigger government with higher taxes. Ten percent (10%) are not sure.”

No doubt that if Downsizing the Federal Government were on college reading lists, support for reform would jump from 62% to at least 90%.

Still, no matter how well-informed the public becomes, Congress poses a barrier to reform. The magic of Congress is its ability to consistently transmogrify the long-standing public preference for smaller government into ever larger budgets. Part of the trick is that members always claim that they support budget restraint in general, while arguing at the same time that each particular program, when it is up for a vote, desperately needs to be expanded.

How then can we realign congressional procedures to better reflect the 62 percent support for government downsizing? Part of the answer is to impose a cap on growth in the overall federal budget, allowing it to grow no more than the average family budget each year.