And there's a lot of talk about Medicaid cuts and people are saying, if Medicaid is cut, people are going to die.
And I thought I would.
Bring somebody on who has been really kind of doing a deep dive for many years on medicaid spending and recently on the tremendous growth of medicaid spending under the last few years of the Biden administration, and joining me now from the Paragon Health Institute.
He is the president.
Brian Blaze joins me today. Brian, good to see you again.
Great to be with you.
So can we start at the beginning for just a moment.
Let's go back to the ACA, the Affordable Care Act Obamacare as.
Most people know it.
What happened there that has created the growth of Medicaid that we're sort of trying to reel in now.
Yeah. So, Medicaid is a joint federal state program and it used to be for for like vulnerable populations, children, pregnant moms, people with disabilities, that have low income. Obamacare's aim was to dramatically expand the number of people that had health insurance coverage, and it mainly did that by expanding Medicaid to able bodied, working age childless adults. And one of the keys with Obamacare is that it created
much more generous terms for states. So basically, the federal government pays all of state spending on this able bodied, working age expansion population. So the federal government has created a discriminatory structure where states get much more money seven times more money from the federal government for a dollar of spending on able bodied, working age adults than spending on traditional enrollees like children, people with disabilities.
Wait, I did not know what you just said, because I'm very well versed in the fact that different states get different levels of Medicaid reimbursement. Some states it's as high as ninety percent, other states it's sixty percent. Somewhere in that window, right, But you're telling me that we've actually incentivized by offering more money from the federal government more services for able bodied single adults than we are offering to single mothers or children or the very poor elderly.
So there's more incentive to take care of those people first because you're going to get more money out of it.
Yeah, it's very moral. It's a perverse funding structure. When Obamacare was created, the federal government paid all of the costs. Now they pay ninety percent of the costs for the able bodied working age population. Another way to think about that is, if states spend a dollar of their own money on able body working age Medicaid rollies, the federal government sends the state nine dollars on average for traditional medicaid and rollies. When states spend a dollar, Washington will
contribute a dollar thirty three. So nine dollars is seven times a dollar thirty three. So states have huge incentives to direct more medicaid resources to the able bodied childless population because the federal government is sending much greater resources to the state.
The problem with that, from where I see it, is that there are especially if you need a specialist. If you're on Medicare, it can be very Medicare Medicaid, if you're on Medicaid, it can be extremely challenging in some areas to even find a specialist that accepts Medicaid in some fields. So now the incentive would be to see those able bodied single adults rather than seeing someone else that you're not getting as higher reimbursement for correct.
Yeah, So, just to be clear, the federal government cuts the checks to the state so the state gets that money coming in, but those incentives will flow through the health sector like you mentioned. So if states are getting much more money for the able body of population, their incentive is to increase spending on that population. And one way they can do that is by setting rates higher for services that expansion and rollies are likely to receive,
then rates the traditional medicaid enrollies would likely receive. So you're going to see a resource allocation away from the vulnerable to the able body.
You've been writing a lot lately, Brian.
You've got a lot of columns at Paragon Health Institute its Paragon Institute dot org. I've got links to a lot of them on the blog today. And you use the word money laundering or the words I guess I should say money laundering. I mean that's pretty strong language. So where do you where are you seeing this money laundering and explain why it fits in that definition.
Well, unfortunately, what I just described as bad, but it's actually far worse in practice because the states don't actually have to come up with real spending in order to get money from the federal government. The claassic example is this thing called a medicaid provider tax, and it's not a tax, it's a kickback scheme. The provider, let's say a hospital system, will lobby the government to assess this tax on them. So let's take some easy numbers. The
state assesses a million dollar tax on the hospital. They take that million dollars and they spend it in a Medicaid payment right back on the hospital. That's just the million dollars changing hands. But the state will bill the federal government for that expenditure, and the federal government will kick in an amount to the state. On average that
amounts about seven hundred thousand dollars. So the state then takes that and directs a lot of that money to the healthcare sector, although the state can use these funds for any purpose. And we wrote a piece on what California did with one of these skis where they got approval for a massive for a scan that led to a massive inflow of federal funds, and then the next year they expanded Medicaid to unauthorized immigrants in the state.
We've done that in Colorado as well.
We are now offering illegal immigrants, women, pregnant women, and children. They are now on Medicaid, which in my mind prevents them from being able to get citizenship because one of the questions that you have to answer is have you ever been on the government doll They ask it nicer than that, but that's what it is. So it sounds like in Colorado we also have the hospital provider fee and things of that nature, fees that serve no purpose, right, and we're told we have to have these in order
to protect rural hospitals or whatever. But now I'm thinking, are they just another way to pad the bill because all taxes are allowed to be considered healthcare expenses, right, So.
It's a way for the state and the provider to collude and get as much federal Medicaid money as possible. So it is. It's an unfortunate so economic actors respond to incentives, and the incentives that we've set up in Medicaid are for the states to develop these financing schemes so that they can pass higher costs for the program
to the federal taxpayer. So all states do this. So we're trapped in this really inefficient equilibrium where all states have direct and used these financing schemes, paying off politically powerful providers in the state and really destroying conservative governance at the state level. So states, if states are one of the things that we need conservatives to do is
figure out priorities and balance budgets. So if we allow states to get out of that by when they have budget difficulty, just creating a Medicaid money laundering scan so that they can get all this Medicaid money coming into the state that the state can use for any purposes, so they don't need to actually seriously look at whether the state budget needs trimming. It destroys government at conservative government to state level, and it significantly increases federal deficits and depth.
So let's talk about how big Medicaid got under Joe Biden. And part of this is attached to COVID, and you know, COVID being the disastrous outlier that it is. Maybe you could understand that Medicaid was expanded or whatever, but what are the real numbers look like? Because now we're hearing lots of people freaking out about the possibility of cutting Medicaid. But what happened in those last few years of the Biden administration and what does a real.
Cut look like? Now that would be take us back to where we were. I guess is what I'm asking.
The two main things happened to the Biden administration and federal Medicaid spending explode in the Biden administration, one is a legacy of COVID. They allowed ineligible people to stay on the program much longer than they should have. Like people, you know, may have lost their jobs at the start of the pandemic and lost their workplace insurance, but most people weren't out of work that long and they got back to work, and most people get health insurance through
their employer. Well, the federal government, we just kept paying Medicaid coverage for those individuals even though they had left the Medicaid roles. So that was one big problem. The second big problem is that the Biden administration really exacerbated these Medicaid money laundering schemes, and we've seen an explosion in them over the last two years. So when we're talking about the word cuts, it's very misleading. There would be no annual cuts. Spending on Medicaid would increase year
after year. It's really just slowing the growth rate of the program. And we're looking like the reforms that I'm advocating for would slower the growth rate from about five percentage percent increase year to about three percent in procedure.
Which is far more manageable in the grand scheme of things. What kind of reforms would you like to see? Is block grants one of them?
And I think block grants is the best reform, So that would be my sort of the conservative gold standard of reforms. We at Paragon have tried to focus on what we think are politically feasible reforms. So what we want to do is two main things. We want to reduce the discrimination that favors the able bodied over the
most vulnerable. We would phase down the Obamacare expansion rate until state's got the same reimbursement rate for able bodied, working age adults and for everybody else on the program. And then we would significantly limit states ability to money launder. We'd cap their ability to engage in these financing schemes, and we would limit their ability to pay off providers with really excessive payments.
Can you explain the block grants to my audience? You may not be familiar with what's the block grants do?
Yeah, so, right now, the problem with the program is that when states spend more, Washington kicks in more spending, so that encourages spending more. What a block rent would do is it would cap the amount that states get from the federal government, So they'd have a list of individuals that they need to provide coverage to their be rules,
and the federal government provide a contribution. Above that, the state could do what they want, but the federal government wouldn't be on the hook for any of the expenditure.
So as an economist, we would say, on the margin, states have incentives to care about the value because every additional dollar the state would bear the full cost versus today where states bear a small fraction of the Medicaid spending and which is the main reason why we have so much wasteful, inefficient spending in the program.
I'm a huge fan of block brands.
I think they're the only way to force sort of economic responsibility onto this dates. But how would you and you guys have probably thought about this, and I'm not smart enough to figure this out, what kind of formula would you use to determine that block grant spending on a per state basis? Because you have states. I lived in Kentucky for three years. When I lived there, it was even before the ACA. They still weren't a ninety percent reimbursement rate for their medicaid spending because.
They're a poor state.
You know, maybe California doesn't need that much, or New York doesn't need that or whatever. How do you come up with that formula to decide? Okay, State of Colorado, we're going to give you twenty billion dollars for medicaid and not a penny more.
How do you figure that out?
Asking great questions, so kudos to you and your audience for getting some smart questions here. I would say the current way that they do it is they base it off of state per capita income, so states get more medicaid spending from the federal government if they have lower per capita income. But that's been abused because richer states have been able to develop more propagate spending, so richer states actually get far more federal spending per person of
poverty than poorer states. What I would do is base it off of the number of people in poverty in a state, So I'd say US citizens, So the number of US citizens and poverty. I think you would then have a federal allocation based on the number of individuals and poverty, and you probably make adjustments for cost of living. States that are higher cost of living, you know, you
send somewhat more funds there. But I think that is a much more rational structure, where you're targeting the funds to something like the number of people in poverty rather than the state's ability to manipulate it.
Would wouldn't block grants just simplify everything so much? I mean, wouldn't it just strip away layers and layers and layers of federal to state bureaucracy. We hand them a check and say, good luck. You know, this is your amount of money. Why is this not politically happening right now? We've got Republicans trying to you know, force work requirements, which I'm one hundred percent in favor of. But this, to me, the big bite at the apple is that
block grant thing. Why can't we get this done? Or states just lobbing too hard against it?
It's a really good question. I mean, it is the left sort of us things as as protecting the entitlement nature of these programs, and if you are distributing funding to states, I think they actually make a lot of claims about block grants, which I think are fairly easy to refute, they'll say that, you know, if what happens, if there's a recession and then states are on the hook for this additional spending, well, there's ways to address
those policies. I would say. It's also one of the unfortunate things about policy is that we get stuck in sort of the inertia of existing policy for works and sort of building off of the inefficiencies in those frameworks. I mean, like I said, I'm a big advocate of block brands. I think it's the best reform for Medicaid. I think in order to implement them in the program, you'd have to have bigger Republican majorities than we have right now.
Oh that's disappointing because ultimately, you know, nobody wants poor elderly people to not be able to get care. Nobody wants someone living with a significant disability to not be able to get care. But at the same time, we can't just have sort of this blank check given to every state, especially now. I mean, and if you read Brian's work, and I linked to four different things on the blog today that he has written about this, it.
Will make you insane.
Because if a private company did anything that the States are doing, they would go to jail. I mean, this is blatant grift. So why can't we somehow get all the politicians in and say, okay, grift is not okay.
We have to disincentivize this stuff.
It makes perfect sense to me, and I'm frustrated that we can't protect this program for the people who really need it while making sure the people that are abusing it, either at the state level or by you know, using Medicaid when they're perfectly capable of working.
We've got to just fix this issue.
What do you think is the biggest what do you think has the biggest potential to reform Medicaid in this very close congress? Where would you like to see Are there ways to nibble around the edges that can have any significant impact?
Yeah?
So, I mean I think you addressed, like, what are the primary problems with the status quo. The fact that we're paying seven times the federal government pays seven times more for able body and working age adults on the
program than traditional enrollees is crazy. That should be I mean, there should be no discrimination in favor of the able body, So addressing that would be a huge win or sort of common sense could government reform and then using state's ability to engage in these money honoring schemes, like there's ways to limit what states can raise to put up as the states share. I think that combination would be some significant reforms. They're doing other things that I think
are buying policy. I mean you mentioned work requirements. I think ensuring to enable bodied, working age people are working or engaged in community service in order to access a welfare benefit makes a lot of sense to me.
Well, Brian, I really appreciate both your work on this at the Paragon Institute, and you know you've got to You've got to believe at some point that enough people will start to say we've got to take care of people, but we don't want to be stolen from.
But it's DC So I just don't know.
This text asked a question, Brian, do we have any idea how many able bodied people are on Medicaid?
Do we know what those numbers are?
I mean, the Obamacare expansion enrollies is about twenty million. Oh, so that's the bulk of it.
Holy mackerel.
I did look up in Colorado our poverty level. Our poverty rate is a roughly seven percent, and yet we have twenty percent of our population on Medicaid, and I think that in and of itself is skewed to me.
Yeah, at the end of the Reagan administration, there were twice as many people in poverty than on medicaid. Now we have twice as many people on Medicaid as in poverty. There's actually more people on Medicaid who have they come above the poverty line than people on Medicaid who think come below the poverty line.
Holy cow, that is appalling, absolutely appalling. Brian Blaze. I appreciate your time, but now I'm aggravated. So maybe I didn't want to do this interview because now I'm frustrated. Keep doing what you're doing, and I'm going to keep spreading the word here. But wow, that's staggering. I can't even believe that. That's nuts.
Sorry to frustrating.
No, I appreciate you, Brian, Thanks for coming on the show today.
All right, thank you?
All right.
That is Brian Blaze with the Paragon Health Institute. They're looking for free market solutions and they do really, really good work. They have a newsletter that you can sign up for if you're a nerd like me and you want to kind of keep in uh, you know, up up.
To speed here.
So wow, that's crazy, absolutely crazy,