Arkansas’ Budget-Busting Medicaid Expansion

Back in February, I highlighted the fight to reauthorize Medicaid expansion under ObamaCare in Arkansas. The states’ plan not only expanded Medicaid; it did so in a more expensive way.  Supporters claimed that the concerns were hogwash. Costs would be the same or lower because Department of Health and Human Services (HHS) required “budget neutrality” for the expansion. A new report from the Government Accountability Office (GAO) confirms that AR’s expansion is a budget-buster.

Medicaid provides insurance to low-income individuals, focused on pregnant women, children, and the disabled. ObamaCare sought to expand this program adding millions of able-bodied, childless adults to the program. States that agreed to dramatically expand the entitlement program would receive a large sum of federal funding. The federal government agreed to fund 100 percent of expenditures through 2016, slowly decreasing to 90 percent in 2020 and after. Even with the large financial enticement, states, rightly, resisted. The program is expensive to operate. States also have little control over the program. The quality of insurance is poor. A 2013 study found “no significant improvements” in health outcomes for individuals joining the program.

Arkansas decided to try something different. Under the plan passed by Democrat Governor Mike Beebe and the Republican legislature, more than 200,000 individuals would join the state’s Medicaid rolls. These individuals would not join the traditional program, but instead would receive money from the state and federal government to purchase insurance on the state’s newly-created health insurance exchange. This plan was preferable, according to advocates, because it would eliminate the known health disparities between traditional Medicaid and private insurance. Better yet, the AR Department of Human Services said that the so-called private option would save the state $670 million over the next ten years and would save the federal government $600 million. Choice and competition would power the market and result in lower prices.

Supporters argued that if the state was going to dramatically expand an entitlement program; it should do it in a fiscally-conservative way saving money in the process.

However, subsidizing Medicaid expansion through private insurance is not fiscally conservative. It turns out that private insurance costs $3,000–or 50 percent more–per enrollee than traditional Medicaid coverage according to the Congressional Budget Office (CBO). Spending $3,000 per person more adds up to a huge added cost for taxpayers. This would be compounded by the Arkansas’ decision–due to federal strings–to eliminate any out-of-pocket expenses for enrollees; no co-pays, no deductibles, no cost-sharing.

Supporters of Arkansas’ expansion claimed it didn’t matter because HHS’s approval required that the plan be “budget neutral.” In other words, the federal government would not spend more than if the state pursued traditional expansion. If the state exceeded the budget cap, the state would be responsible for the additional expenses. The state would be forced to tweak the program later if costs rose.

The plan passed and costs quickly grew. The first month was overbudget. As of June, the program was $10 million overbudget.

GAO now says that HHS did not guarantee budget neutrality in the Arkansas plan suggesting that even more taxpayer money is at risk. “HHS did not ensure budget neutrality. HHS approved a spending limit that included hypothetical costs despite questionable state assumptions and limited supporting documentation…HHS officially told us they accepted the state’s projections of the increased cost of expanding Medicaid in the absence of a demonstration without requesting data to support the state’s assumptions.”

HHS just accepted what Arkansas said, and did not question the state’s assumptions. The promised federal backstop does not seem to exist. GAO estimates that the “$4.0 billion spending limit approved by HHS was about $778 million [over three years] more than what it would have been.”  That’s a 20 percent increase in costs for federal taxpayers.

Making matters worse, GAO says that AR has the authority to “adjust the approved spending limits if costs…prove higher than expected.” This sort of upward flexibility never used to be granted, but HHS recently granted it to 11 other states. AR has already acknowledged that it might need a higher spending limit.

This is not the first time that GAO has highlighted HHS’ inability to properly enforce budget neutrality. HHS’ refusal to properly set spending caps is costing federal taxpayers millions, or billions, more than it should. GAO confirms that Medicaid expansion in Arkansas is busting the budget.  

Clinton and Bush Introduce Leadership Program

Yesterday Bill Clinton and George W. Bush reportedly gushed “about each other’s leadership and acute decision-making skills.”  The two former presidents were launching a “joint program to train young leaders.”

According to the New York Times story, the audience was “packed with Bush and Clinton White House alumni.”  Oh, that explains all the laughter and backslapping.  The former presidents were confident that no one would ask them serious questions about their actions in office.  Here are a few questions that young leaders might consider asking the gentlemen before applying for their program:

Thank You, Mrs. Klose

Thank you for standing up for your right, and that of other Americans, not to be coerced: 

Lillian Gobitis Klose, who as a school-age member of the Jehovah’s Witnesses refused to salute the U.S. flag with her classmates, a controversial act of conscience that set off a legal tug of war in the 1930s and ’40s that ultimately bolstered the First Amendment right to religious expression, died Aug. 22 in Fayetteville, Ga. She was 90.

School officials in Minersville, Pa., where her parents ran a grocery store, expelled the young Ms. Gobitis for this act of defiance. But convinced that her Jehovah’s Witness faith forbade a public display of allegiance to a national symbol, she took the case all the way to the U.S. Supreme Court in 1940 – and lost, 8-1, with Justice Felix Frankfurter writing, sententiously, that “National unity is the basis of national security.”

Hers wasn’t a comfortable stand to take, especially with war looming, as the Washington Post’s obituary notes:

“It was a very scary time,” Mrs. Klose told the Atlanta Journal-Constitution. On one occasion, the Gobitis family was in a car when a mob attempted to flip it over. Another time, she told the Philadelphia Inquirer, the police chief parked his car outside her family’s grocery store to protect it from a threatened attack.

Especially with homeschooling rights virtually unrecognized at the time, Jehovah’s Witness youngsters were at risk of being sent to state reformatories, and their parents were at risk of prosecution for contributing to delinquency.  But by yielding no ground, Lillian Gobitis prepared the way for a victory just three years later, when in a case with similar facts, West Virginia State Board of Education v. Barnette, the high court reversed itself and in a 6-3 ruling upheld the right not to salute the flag or say the pledge. Justice Robert Jackson’s ringing pronouncement was to enter the constitutional canon: “If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.”  

It always did seem a bit hopeful for Jackson to pronounce that principle a “fixed star”; after all, the Court was reversing a contrary ruling from just three years previous. But the phrase was more accurate as prediction: the principle was to become a fixed star in constitutional jurisprudence, to the immense benefit of Americans and our liberty. Even in an era in which, ominously, some elected officials seek to roll back other First Amendment protections, there is little if any movement to reverse the flag and pledge decisions.

Well done, Lillian Gobitis Klose.

 

 

Hungry Congressional Staffers Discover the Value of Trade

Under current ethics rules, members of Congress are allowed to receive gifts of snack food from companies located in their states or districts, as long as the snacks are available to office visitors.  While constituents visiting the Capitol may be getting to enjoy home-grown treats, the real beneficiaries here are the office employees who have privileged access to free snacks.

Yesterday Politico ran a light-hearted story about a thriving, informal market that has developed for congressional staffers to trade these free snacks.  It’s funny and you should read it in its entirety.  In order to be insufferably pedantic, I thought I would share a few thoughts on how this peculiar market, like all markets, developed as a way for individual humans to improve their lives through trade.

The rules create a peculiar inconvenience for hungry staffers, as they can only get free snacks produced by a company in their boss’s district.  Some offices only have Pepsi products while others only have Coke.  Some have healthy food and some have junk food.  Free snacks are great and all, but what do you do when the snacks you have aren’t the snacks you want?

The problem here is a non-optimal distribution of snacks, and the solution is trade.

Dozens of junior staff who spoke with POLITICO described an elaborate barter system based on local products. Pepsi is swapped for M&M’s, and Coca-Cola for Craisins.

Some of the foods that are most highly in demand are also well supplied in Capitol Hill offices, while others appeal to more particular tastes.  These realities shape their value as products to trade. 

Frito-Lay chips and Mars candy are the most common — and perhaps the most commonly traded — snacks on the Hill. Both manufacturers have operations in several states.

And orange juice, it turns out, is a hot commodity on the Hill, trading at times for as many as five bags of Lay’s chips.

Not all products on the political circuit are well-known brands. Sen. Richard Blumenthal (D-Conn.) has Ola! all natural granola, Rep. Sam Graves (R-Mo.) has Cherry Mash, a chocolate cherry treat, and Rep. Dave Reichert (R-Wash.) has Aplets & Cotlets, a square fruit puree and nut snack that isn’t all that tradable.

What Sort of Problem Is ISIS?

The quality of the discussion about what sort of problem ISIS poses to the United States has been unsurprisingly poor, given who is framing it. All Americans have been appalled by the grotesque killings of James Foley and Steven Sotloff, two American hostages held by the Islamic State. The justness of vengeance against their killers is something everyone agrees on.

But beyond that, the debate is stunning by its internal contradictions. Take, for example, the fact that the outgoing director of the National Counterterrorism Center recently announced that while ISIS “poses a direct and significant threat to us,” there is “no credible information [it] is planning to attack the US.” This echoed the judgment of both the Chairman of the Joint Chiefs of Staff and the FBI and the Department of Homeland Security, which issued similar judgments last month.

At the same time as those charged with threat assessment are stating ISIS does not at present pose a threat to US territory, our political leaders are unanimous in judging that the United States needs to involve itself more deeply in the war taking place across the Syria-Iraq border. Shouldn’t we worry at least a bit that taking sides against it in that war makes the Islamic State more likely to target the United States at home, not less? (For their part, the barbarian murderers of Foley and Sotloff stated that their actions were intended to avenge prior US airstrikes on ISIS.) One could argue that trying to destroy ISIS is worth raising the risk they will target US territory, but shouldn’t the marginal impact of its likelihood of an attack on us here at least show up on the ledger?

Or take the recent statements of our politicians. President Obama famously remarked that he didn’t have a strategy for what to do about ISIS, even though his administration was already bombing them. On Meet the Press, Obama added his voice to those claiming there’s been no “immediate intelligence about threats to the homeland from ISIL.” Rather, according to Obama, “ISIL poses a broader threat because of its territorial ambitions in Iraq and Syria.”

Secretary of State Kerry offered some thoughts on ISIS last week, in which he made clear the administration’s desired end-state: “destroy ISIL”:

these guys are not 10 feet tall. They’re not as disciplined as everybody thinks. They’re not as organized as everybody thinks. And we have the technology, we have the know-how. What we need is obviously the willpower to make certain that we are steady and stay at this.

There is no contain policy for ISIL. They’re an ambitious, avowed genocidal, territorial-grabbing, Caliphate-desiring, quasi state within a regular army. And leaving them in some capacity intact anywhere would leave a cancer in place that will ultimately come back to haunt us…

Two points here. First, if ISIS is in fact as Kerry describes it—a group that isn’t 10 feet tall, a group that isn’t as disciplined or organized as everybody thinks, and a group that is really a quasi state with grandiose objectives—then why isn’t containment a viable option? Grandiose objectives are hard to obtain even for actors who are disciplined and well-organized, even those that are 10 feet tall. So why isn’t ISIS—which Kerry says isn’t so powerful but has ambitious objectives—likely to burn out like so many of its predecessor groups have?

U.S. Need Not Defend Turkey From Islamic State

Apparently Washington believes its allies to be wimps and weaklings.  Why else would NATO officials promise to defend Turkey from the Islamic State?  Surely this well-armed U.S. ally can hold off a few thousand Islamic irregulars, some of whom Ankara allowed to enter Syria next door.

The rise of the Islamic State has led to much nonsense from Washington officials who speak as if the group was capable of conquering America.  ISIL is made up of dangerous fanatics, but in the form of the Islamic State they are largely powerless to harm the U.S. 

Their conventional capabilities are minimal compared to those of the U.S.  Moreover, so long as the Islamists are attempting to conquer territory they cannot afford to launch terrorist attacks on America, which would bring down the full wrath of the U.S. military on the return address they had so thoughtfully provided.

Among the states really threatened by ISIL is Turkey.  This led NATO Secretary-General Anders Fogh Rasmussen to promise to defend Ankara:  “If any of our allies, and in this case of course particularly Turkey, were to be threatened from any source of threat, we won’t hesitate to take all steps necessary to ensure effective defense of Turkey or any other ally.”

However, Ankara is partly to blame for ISIL’s rise.  The Erdogan government decided to support the ouster of Syrian President Bashar al-Assad and allowed opposition fighters from all sides, including ISIL, easy access to the battlefield. 

Who Pays for Campaigns?

While the Senate votes on a constitutional amendment to carve out an exception to the First Amendment by limiting spending on political campaigns, members of Congress have no compunctions about spending tax dollars on their own re-elections. WAMU radio in Washington reports on some of the expenditures by D.C., Maryland, and Virginia members: 

“I think franked mail is a tool that can be used to communicate with your constituents,” [Rep. Gerry] Connolly [R-Va.] says.

Last year Connolly spent more than $94,000 of your tax dollar on mostly glossy, color pamphlets with pictures of him at his office declaring his support for federal workers, while D.C. Del. Eleanor Holmes Norton spent just over $3,000 touting her record. Maryland Democrat John Delaney spent more than $50,000, which his press secretary says is to introduce his freshman boss to voters, which watchdogs say gives him a leg up over his challenger, Republican Dan Bongino. Congressman Randy Forbes (R-Va. 4) spent about $30,000 on Facebook ads, railing against “Obamacare,” questioning “Free taxpayer funded cell phones” and on dozens of electronic polls, which he defends.

It’s not that members of Congress object to people spending money on elections. They just want the people’s money sent to Washington, and spent by Congress, on their own re-election efforts. So much less messy and divisive that way.