Medicare Pays $869 for an Air Mattress. (Yawn.)

The Justice Department’s Medicare Fraud Strike Force (cue theme music) has announced the arrest of 38 people who allegedly defrauded Medicare by charging outrageous amounts for items that were never delivered … like an $869 air mattress … and … I’m sorry, I nodded off. 

This is nothing new.  In Medicare Meets Mephistopheles, David Hyman quotes former Medicare administrator Bruce Vladeck:

“There are plenty of $400 toilet seats in the Medicare program…”

Nor is the amount of money involved impressive.  In all, these people allegedly defrauded Medicare for $142 million, or 0.038 percent of annual Medicare outlays.  HHS Secretary Michael Leavitt estimates that further anti-fraud efforts could save as much as $2.5 billion, or 0.67 percent of Medicare outlays … I’m sorry, I nodded off again.  Here’s some more from David Hyman:

In fact, no one knows how common fraud and abuse are, but 72 percent of the American public believes that Medicare would have no financial problems if fraud and abuse were eliminated. This perception is utterly uninformed by any connection with reality…

Fraud is bad, mmm-kay?  But while Medicare’s anti-fraud laws occasionally nab some real bad guys, according to Hyman they probably inflict as much damage as they prevent:

The vast sums of money spent by Medicare create the demand for [anti-fraud] laws to restrain the avarice of providers. Provider avarice triggers a search for ways around those laws, which, in turn, results in the broadening of those laws. As the laws are broadened, they discourage organizational innovation and market entry and catch more innocent providers. This, in turn, triggers a backlash against the law and widespread violation thereof. Plus, lawyers get rich off each step.

We’re barking up the wrong tree, here.  If you’re looking for real and substantial fraud in Medicare, look no further than the politicians who have promised Medicare benefits well in excess of the program’s ability to pay, or who pooh-pooh the program’s future funding shortfalls.  Again, Medicare Meets Mephistopheles:

The legal system imposes harsh penalties on pyramid scheme organizers, because defrauding hundreds or thousands of people is much worse than defrauding a handful of people. Indeed, if anyone other than the United States government were running the Medicare program, those responsible would already be serving long prison terms for fraud.

Now that’s an anti-fraud operation to get excited about.

Seeking to Maintain Price Cartel, Wisconsin Threatents Penalties Against Civic-Minded Gas Station Owner

State governments often collude with businesses to undermine competition and create unearned profits. Wisconsin’s mandatory 9.2 percent gasoline mark-up is a good example. Service stations get a government-enforced cartel, politicians doubtlessly get campaign contributions, and consumers are victimized. Yahoo.com reports on government price-fixing:

A service station that offered discounted gas to senior citizens and people supporting youth sports has been ordered by the state to raise its prices. …the state Department of Agriculture…says those deals violate Wisconsin’s Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price. Bhandari said he received a letter from the state auditor last month saying the state would sue him if he did not raise his prices.

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“Dopey” Triumphant?

Over at The Quick and the Ed, Sara Mead objects to a post I put up Monday illustrating that a recent college graduate with an average student loan burden who became a public school teacher could afford to make his monthly loan payments, take care of his essentials, and still have a fair amount of money left over on his first-year salary. I wrote the post in response to something Mead’s colleague Kevin Carey seemed to be saying last Saturday on Washington Journal: that student debt is so high many graduates can’t afford to go into teaching. 

So what are Mead’s objections to what I wrote? The first is that my post featured “dopey back-of-the-envelope calculations.” And the second? Well, you’d think she’d go on to explain why my calculations were dopey. But she doesn’t. In fact, dopey or not, while she mainly avoids the question at hand, she also more-or-less concedes that I was right:

I’m also not sure that starting teachers are the best place to focus in thinking about this issue. When my sister started her first teaching job out of college, she made more than I or most of our liberal-artsy friends did in our first jobs.

Ah, to be dopey. Apparently it works like a charm!

The Welfare State Causes “Sickness”

Sweden suffers from the world’s highest reported disability rate. This does not mean people there are actually sick, to be fair, but it does show that the welfare state creates bad incentives. People with weak values learn that they can feed at the public trough instead of doing something productive with their lives. A Wall Street Journal story explains how Swedish policy makers are trying to reverse the damage:

Swedes are among the healthiest people in the world according to the World Health Organization. And yet 13% of working-age Swedes live on some type of disability benefit – the highest proportion on the globe. To explain this, many Swedish policy makers, doctors and economists blame a welfare system that is too lax and does little to verify individual claims. … [G]overnments from Finland to Portugal are trying to cut back and get more people to work. Sweden’s bloated sick bay, which includes roughly 744,000 people on extended leave, has caused soul-searching about whether the system coddles Swedes and encourages them to feel sick. … During the 2002 monthlong World Cup soccer finals, short-term sick leave among Swedish men suspiciously rose by 55%. Earlier this year, police in Sweden’s capital city Stockholm investigated the local chapter of the Hell’s Angels biker gang for suspected benefit fraud, because 70% of the gang were on extended sickness benefits. The same doctor had certified them all as suffering from depression. … In Europe, roughly 20% of the working-age population – or 60 million people – depend on various government benefits as their sole or main income, compared with 13% in the U.S. That’s a major economic handicap. … Assar Lindbeck, one of Sweden’s best-known economists, says the lenient welfare state has changed the country over the past generation. In place of the old Protestant work ethic, it has become acceptable to feel unable to work and to live on benefits, he says. “I would not call it cheating,” Prof. Lindbeck says. “I would call it a drift in attitudes and social norms.”

It’s All About the Benjamins …

The Friedman Foundation is out with a great new report detailing the fiscal impact of all school choice programs from 1990 to 2006. They all save a bundle of money, despite their small size and other limitations. School choice saved $444 million, according to their calculations. And that is literal small change compared to the massive amounts a truly free educational system could save state and local governments.

The school choice movement has one large hurdle to clear before the barriers to educational freedom fall: Convince the broad middle class that educational choice is good for the broad middle class.

It is, of course…  school choice saves money and children. And programs that provide for universal educational freedom would save mountains of money while giving middle-class parents the direct benefit of school choice.

But people think that school choice programs will increase the cost of education (and they have no idea how much money government schools actually eat up already). Constantly pounding the educational inequity drum will simply reinforce that perception and offer the middle class nothing in return.

The typical voter wants to help poor kids … but what have all the government programs meant to address inequities gotten us? Mo money, mo problems. Most government programs meant to address inequities end up soaking the taxpayer and changing little, if anything, for the better.

The school choice movement needs to do a much better job at convincing the middle class that school choice, and the fiscal argument for school choice is a great one that advertises benefits for taxpayers with and without children.

With property tax burdens at a high point and rates rising across the country, now’s a great time to highlight the fiscal recklessness of the education-industrial complex and how school choice can fix it.

More Evidence that 2003 Tax-Rate Reductions Boosted Growth

Some politicians want higher tax rates because they resent success and think it is okay to base public policy on emotions like hate and envy, but most pro-tax lawmakers presumably are interested solely in getting more money to spend. These “practical” lawmakers may want to consider becoming supply-side tax cutters. After all, the Treasury has received a gusher of additional tax revenue since the 2003 reductions in capital gains tax rates, dividend tax rates, and personal income tax rates. The real lesson, of course, is that pro-growth tax policy leads to faster growth – and faster growth translates into more taxpayers and more taxable income. As the Wall Street Journal opines, the key question is whether politicians can control the impulse to over-spend:

Americans are sending more money than ever to Washington; revenues for the first seven months of fiscal 2007 are up 11.3%, or $153 billion. This Beltway bonanza has helped to slash the projected federal budget deficit by more than half from the same point last year. Across the past three Aprils, federal red ink has sunk by nearly $300 billion. The deficit this year could tumble to $150 billion, or an economically trivial 1% of GDP. This revenue boom certainly casts doubt on the political wails about tax loopholes for the rich. So far this year, the taxes paid on so-called nonwithheld income, which are dollars that don’t come from normal wages and salaries, have climbed by nearly 30%. This is income largely derived from capital gains, dividends and other investment sources – i.e., the tax rates that President Bush cut in 2003. Individual income taxes are also up by 17.5% – a handsome fiscal dividend from rising wages and low unemployment. In other good news, the pace of federal spending, which was pedal-to-the-metal in Mr. Bush’s first term, has finally decelerated. So far this year federal outlays have climbed by 3%, and, save for Medicare and Medicaid, federal expenditures are nearly flat from 2006.

Don’t Expect Much from Sarkozy

A Financial Times column neatly summarizes the economic views of Nicolas Sarkozy. His opposition to “fiscal dumping” really means that he opposes tax competition and wants to insulate the French welfare state from global competition:

He wants the EU to move in a French direction, offering citizens “protection” from the outside world. …During the campaign, he called on the EU to protect its citizens from unfair competition from abroad, particularly
Asia, and from fiscal, social and environmental “dumping” from poorer EU members in eastern Europe. That approach is at odds with the “open
Europe” model being promoted by most northern, central and eastern European countries.