The Rich Get Richer: Senate’s Medicaid Proposal Gives Bigger Bailout to Wealthier States

People were rightly upset when they learned about the “Cornhusker Kickback,” the deal whereby Sen. Ben Nelson of Nebraska sold his vote in favor of the Senate’s health bill in exchange for his state never having to pay for any of the Medicaid expansion in the bill.

However, the biggest problem with the Medicaid expansion in the Senate health bill is not the “Cornhusker Kickback,” but that it leverages an already flawed formula to determine federal payments to state Medicaid programs. The Senate bill would motivate states to invest more resources in recruiting higher-income residents into Medicaid, rather than traditionally eligible beneficiaries, including the blind and disabled. The Senate bill also gives richer states a bigger Medicaid bailout than lower income ones. New Hampshire, Maryland, and Connecticut get the biggest handouts, while Mississippi, West Virginia, and Arkansas are short-changed, according to my just published analysis.

The Federal Medical Assistance Percentage (FMAP) is the federal financing formula that encourages each state to spend its own taxpayers’ money irresponsibly in order to maximize its take from other states. For example, California’s FMAP was traditionally the 50 percent minimum: For every dollar California spent, the U.S. Treasury would kick in one dollar. However, the FMAP is supposed to give more federal dollars to states with more poor people. So, Mississippi has had the highest FMAP, 75.67 percent: For every dollar Mississippi spent on Medicare, the U.S. Treasury would kick in $3.11.

The Senate bill proposes a much higher FMAP, averaging 90% nationwide, in 2019. However, the higher FMAP would only apply to the relatively higher-income, able-bodied, newly eligible, beneficiaries. People eligible under the current law will still draw the previous FMAP. States with FMAPs of 50 percent would see them increased to 82.3 percent for the newly eligible beneficiaries. Imagine yourself a county public-health bureaucrat who would attract one federal dollar for every dollar spent on a blind or disabled Medicaid beneficiary, or $4.65 for every dollar spent on an able-bodied young man. Obviously, you would invest your energy in recruiting the able-bodied youth.

Furthermore, the expanded FMAP gives more federal fiscal leverage to rich states: Each thousand-dollar increase in money income per capita is associated with a one-percent increase in the FMAP under the Senate bill, and this statistically significant regression explains over one-third of the variance in the change in FMAP.

For example, New Hampshire’s money income is $68,175 per capita, which is $16,942 greater than the national average of $51,233. Its FMAP would increase from 50 percent to 82.3 percent, an increase of 65 percent. This is 18 percent greater than it would have been if higher per capita incomes did not explain the Senate’s “generosity.” On the other hand, Mississippi’s FMAP increases by only 20 percent: From the current 74.73 percent to 95 percent. This increase is 15 percent less than it would have been if the state’s low income did not explain its poor outcome in the Senate’s FMAP allocation.

Instead of leveraging the FMAP, Medicaid reform should jettison it entirely, in favor of easily understood block grants.

Nebraska to Consider Freedom of Health Care Choice

Legislators in yet another state have introduced a version of the Freedom of Choice in Health Care Act into the legislative hopper.

The Tenth Amendment Center has the details.

A quick reminder of why this is significant: It’s a sign of political dissatisfaction with the health reform law being negotiated behind closed doors in Washington, DC. It’s also a testament to the American system of government which relies not only on elections that select the president and Congress, but on states and their legislators to have a significant role in matters of politics and governance.

Nelson’s Ad Short on Facts

I have a commentary in yesterday’s Omaha World-Herald challenging the claims that Sen. Nelson makes in his new health care ad defending his vote for the Senate’s health reform bill. Given the opposition he has faced in the state and the findings of independent experts, Sen. Nelson may want to rethink his support for the legislation when it comes up for a final vote.

Here it is:

In his new television ad, U.S. Sen. Ben Nelson defends his vote for the Senate’s health overhaul bill with a number of compelling arguments — compelling, but not supported by the facts.

Sen. Nelson tells Nebraskans the bill “lowers costs for families and small businesses, protects Medicare . . . and reduces the deficit. And it’s not run by the government.”

In fact, polls show that a strong majority of Americans surveyed, including a majority of Nebraskans polled, oppose this health bill because they understand what independent experts have confirmed: The legislation would increase health insurance premiums for tens of millions of people, jeopardize access to care for many seniors, burden future generations with trillions of dollars of new debt and entrust government — not patients and doctors — with control over many personal health care decisions.

The independent, nonpartisan Congressional Budget Office (CBO) finds that families purchasing health insurance in the individual market (such as farmers, ranchers and other self-employed people) would actually see their premiums increase. They would be $2,100 higher in 2016 if the Senate bill is enacted than they would be if Congress did nothing. “Reform” for them means higher costs.
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Something Good Coming out of Nebraska

You’ve heard about the Cornhusker Kickback, in which Sen. Ben Nelson offered up a crucial vote in the U.S. Senate in exchange for a special favor for Nebraska residents, courtesy of everyone else in the country.

Here’s a more positive development coming from Nebraska: State Sen. Scott Price has introduced Legislative Bill 693, which would make it easier for out-of-state companies to sell health insurance in the state. If Nebraskans can’t find an insurance policy they like from within the state, the thinking goes, they should be able to buy one from willing sellers in other states. In the strange world of insurance regulation,  it lets “foreign” insurers (say, those from Iowa)

That makes sense, and it’s how we buy food, clothing, cars, and even other  forms of insurance.

The legislation lets “foreign” companies sell insurance if they conform to a compact that Iowa makes with other states. It’s a start, though it does require that the state(s) in the interstate compact have “laws, rules, and regulations” that are “substantially similar” to those in place in Nebraska.

The Omaha World-Herald finds, not surprisingly, that the dominant insurer in the state doesn’t like the idea.

Oklahoma AG Looking into Cornhusker Kickback

Opposition to the Nebraska Compromise, sometimes called the Cornhusker Kickback, has become bipartisan. Drew Edmondson, the Democratic attorney general of Oklahoma, “is already working with a group of state Attorneys General about their concerns with the Nebraska part of that U.S. Senate health care bill,” according to his spokesman.

Under the proposed health policy legislation, Nebraska, like most states, will be forced by Congress expand its Medicaid program by raising the income limit on people who are in it. Under the kickback, Nebraska, alone, will have the increased costs totally paid for through the federal government–in other words, by taxpayers in other states.

Is Nebraska unusually poor? Not especially. It just happened to have one U.S. senator whose vote provided the momentum for the Senate bill to move forward. So we could have been talking about “Michigan Mad Money” or some such if the key vote had some from someone else.

All this reminds me of a comment one of our bloggers said a while ago: “one of the best reasons for insisting that policy debates begin with a commitment to free market principles [is] not because the free market always provides universally satisfactory results, but because government-imposed solutions are always based upon the arbitrary exercise of power exercised by whoever happens to have their hands on the levers at any moment.”

Fact-checking Sen. Ben Nelson

Sen. Ben Nelson is defending his vote to pass the Senate’s health-care legislation in a new television ad in his home state of Nebraska, but the points he makes show he either needs to force Congress to change the legislation to match his claims or rethink his support for final passage.

In an attempt to quell a firestorm of opposition to his casting the crucial 60th vote for the Senate bill, Nelson says, “With all the distortions about health-care reform, I want you to hear directly from me.”

He argues that the bill “lowers costs for families and small business, protects Medicare, finally guarantees coverage for preexisting conditions, and reduces the deficit. And it’s not run by the government.” Nelson adds, “I’m convinced this is right for Nebraska.”

Who wouldn’t vote for such a bill? If only Nelson’s comments were accurate.

Nelson wisely doesn’t mention the controversial “Cornhusker Kickback” that granted federal funding for his state’s Medicaid expansion, or the abortion language that the U.S. Conference of Catholic Bishops says does not guard against federal funding of abortion. But there are serious problems with the claims the senator does make.

Independent analysts show that health costs would continue to rise, access to care could be jeopardized for seniors, deficit reduction is an illusion created by budget gimmicks, and the preexisting-condition clause would come at the price of big-government control.

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Would You Like a California Cash Cow or New York Pork With Your Florida Flim Flam?

California’s recent budget deficits will look bush league relative to the fiscal hurricane that federal health reform will unleash on California and many other states.   The problem stems from the expansion of Medicaid, the program for low-income residents, jointly funded by the federal and state governments.

Most observers anticipate that if President Obama does sign a bill this year, it will look more like the Senate bill (an amendment to H.R. 3590), which would pull millions of Americans into government dependency for their access to medical services via an expansion of Medicaid.

The Congressional Budget Office (CBO) reckons that 15 million more people will enroll in Medicaid if the Senate bill becomes law (p. 8), which is just a whisker less than half the total number of persons the CBO forecasts will be newly insured, 31 million, as a result of the “reform.” This is like the government stating that it will reduce the number of jobless by putting millions more on welfare and classifying them as “employed.”

From 2014 through 2016, the federal government would cover the entire cost of roping these people into Medicaid. By 2019, however, the federal government would pay only about 90 percent of the costs of Medicaid expansion, leaving the states to pick up 10 percent. That’s how it was supposed to work, until we learned about elements in the bill such as the “Cornhusker Kickback.”

Senate Majority Leader Harry Reid bought Senator Ben Nelson’s vote in favor of the bill by promising that Nelson’s state of Nebraska would never have to pay for any of the Medicaid expansion. The federal government or, more properly, the taxpayers of California and 48 other states, would pay for Medicaid expansion in Nebraska. Similar deals for other senators were labeled the “Louisiana Purchase” and the “Florida Flim-Flam.”

Some governors are getting pretty uncomfortable with the way the deal has been hammered out. In a pre-Christmas letter to Speaker Nancy Pelosi, Governor Schwarzenegger charged that the federal plan levied an unfunded mandate on California that would cost the state $4 billion to $5 billion.  But he’s unlikely to get a “California Cash Cow.”

Many states, including California, have long since convinced the federal government to allow them to increase Medicaid eligibility. Of course, this has allowed them to draw down even more federal dollars. (Before the February 2009 “stimulus” bill, the federal government paid for 57 cents of each Medicaid dollar, on average.) Because these states have already bloated their Medicaid programs, they will not enjoy the bailout the federal “reform” offers states that have limited Medicaid enrollment to date.

One of the 24 measurements in the U.S. Index of Health Ownership is the level of Medicaid eligibility. A state scores low if it has recklessly expanded government dependency in this way. In the third edition (2009), California ranks 30th out of 50 states but plenty of states do worse. Consider New York, a lowly 45th in the Index’s measurement of Medicaid eligibility.

“We are, in a sense, being punished for our own charity,” moaned Governor David A. Paterson, in response to the proposed Medicaid funding formula. “Charity” is an interesting noun to describe the Empire State’s approach to Medicaid. Last July, New York State and New York City agreed to pay the federal government $540 to settle allegations from the U.S. Department of Justice that they had submitted false Medicaid claims! A December 26 audit by state Comptroller Thomas DiNapoli accused the state’s health bureaucrats of recently approving $92 million in fraudulent payments.

Wendy Saunders, New York’s Deputy Secretary of Health, now shamelessly suggests a heaping plate of “New York Pork.” She thinks the federal government should throw an extra $30 billion New York’s way over 10 years, above what’s currently in the Senate bill. Unfortunately, in order to convince its stenographers in the media that the “reform” is deficit neutral, the majority took such drastic steps as proposing a luxury tax on tanning salons and cutting about $400 billion from seniors’ Medicare benefits.

All this comes in order to fund a significant expansion of government, a plan supposedly too big to fail. Governors Schwarzenegger and Paterson, and their long-suffering taxpayers will soon learn, however, that the feds are unlikely to find the dollars for more bailouts.

Nebraskans Don’t Care Much for ObamaCare or Senator Nelson

Sen. Ben Nelson (D-Neb.) struck a special deal with President Obama and Sen. Harry Reid (D-Nev.) for his vote for ObamaCare.

Sen.  Nelson apparently thought he would return to his Nebraska home as a conquering hero. As it turns out, Nebraskans do not care much for Nelson and his support of ObamaCare as Rasmussen Reports noted.

Nelson’s health care vote is clearly dragging his numbers down. Just 17% of Nebraska voters approve of the deal their senator made on Medicaid in exchange for his vote in support of the plan. Overall, 64% oppose the health care legislation, including 53% who are Strongly Opposed. In Nebraska, opposition is even stronger than it is nationally.Fifty-six percent (56%) of voters in the state believe that passage of the legislation will hurt the quality of care, and 62% say it will raise costs.

If Gov. Dave Heineman challenges Nelson for the Senate job, a new Rasmussen Reports telephone survey shows the Republican would get 61% of the vote while Nelson would get just 30%. Nelson was reelected to a second Senate term in 2006 with 64% of the vote.

Sen. Nelson is fortunate that he is not up for reelection until 2012. Much can happen in that time. It is quite possible the good folks of Nebraska might hold a recall election and fire him. That would be refreshing.

Sen. Ben Nelson’s poll numbers will be a bellwether of others in the House and Senate who support ObamaCare and other items of the Radical Obama agenda. Hopefully many other Progressive Democrats will be retired soon from Congress, including Nancy Pelosi and Harry Reid.

Read the entire column at Lubbock Online.

Seven Republican AGs Challenge Reid Deal

StateLine.Org has found what may turn out to be some useful Republicans: “The Republican attorneys general of Alabama, Colorado, Michigan, North Dakota, South Carolina, Texas and Washington State are threatening to challenge as unconstitutional a provision written into the U.S. Senate’s national health care bill that cuts a special deal for Nebraska.”

Senate Health Care Reform Spells Trouble for Nebraska

I was invited by the editorial page editor of the Omaha World-Herald to write a piece for them on the health reform debate.  My commentary, published in Sunday’s paper, focused on some of the many reasons that the legislation would be bad for Nebraska — and the nation. Read on for the full text.

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