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<v Speaker 1>And there's a lot of talk about Medicaid cuts and

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<v Speaker 1>people are saying, if Medicaid is cut, people are going

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<v Speaker 1>to die.

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<v Speaker 2>And I thought I would.

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<v Speaker 1>Bring somebody on who has been really kind of doing

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<v Speaker 1>a deep dive for many years on medicaid spending and

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<v Speaker 1>recently on the tremendous growth of medicaid spending under the

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<v Speaker 1>last few years of the Biden administration, and joining me

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<v Speaker 1>now from the Paragon Health Institute.

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<v Speaker 2>He is the president.

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<v Speaker 1>Brian Blaze joins me today. Brian, good to see you again.

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<v Speaker 3>Great to be with you.

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<v Speaker 2>So can we start at the beginning for just a moment.

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<v Speaker 1>Let's go back to the ACA, the Affordable Care Act

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<v Speaker 1>Obamacare as.

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<v Speaker 2>Most people know it.

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<v Speaker 1>What happened there that has created the growth of Medicaid

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<v Speaker 1>that we're sort of trying to reel in now.

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<v Speaker 3>Yeah. So, Medicaid is a joint federal state program and

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<v Speaker 3>it used to be for for like vulnerable populations, children,

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<v Speaker 3>pregnant moms, people with disabilities, that have low income. Obamacare's

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<v Speaker 3>aim was to dramatically expand the number of people that

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<v Speaker 3>had health insurance coverage, and it mainly did that by

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<v Speaker 3>expanding Medicaid to able bodied, working age childless adults. And

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<v Speaker 3>one of the keys with Obamacare is that it created

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<v Speaker 3>much more generous terms for states. So basically, the federal

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<v Speaker 3>government pays all of state spending on this able bodied,

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<v Speaker 3>working age expansion population. So the federal government has created

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<v Speaker 3>a discriminatory structure where states get much more money seven

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<v Speaker 3>times more money from the federal government for a dollar

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<v Speaker 3>of spending on able bodied, working age adults than spending

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<v Speaker 3>on traditional enrollees like children, people with disabilities.

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<v Speaker 1>Wait, I did not know what you just said, because

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<v Speaker 1>I'm very well versed in the fact that different states

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<v Speaker 1>get different levels of Medicaid reimbursement. Some states it's as

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<v Speaker 1>high as ninety percent, other states it's sixty percent. Somewhere

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<v Speaker 1>in that window, right, But you're telling me that we've

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<v Speaker 1>actually incentivized by offering more money from the federal government

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<v Speaker 1>more services for able bodied single adults than we are

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<v Speaker 1>offering to single mothers or children or the very poor elderly.

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<v Speaker 1>So there's more incentive to take care of those people

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<v Speaker 1>first because you're going to get more money out of it.

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<v Speaker 3>Yeah, it's very moral. It's a perverse funding structure. When

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<v Speaker 3>Obamacare was created, the federal government paid all of the costs.

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<v Speaker 3>Now they pay ninety percent of the costs for the

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<v Speaker 3>able bodied working age population. Another way to think about

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<v Speaker 3>that is, if states spend a dollar of their own

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<v Speaker 3>money on able body working age Medicaid rollies, the federal

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<v Speaker 3>government sends the state nine dollars on average for traditional

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<v Speaker 3>medicaid and rollies. When states spend a dollar, Washington will

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<v Speaker 3>contribute a dollar thirty three. So nine dollars is seven

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<v Speaker 3>times a dollar thirty three. So states have huge incentives

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<v Speaker 3>to direct more medicaid resources to the able bodied childless

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<v Speaker 3>population because the federal government is sending much greater resources

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<v Speaker 3>to the state.

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<v Speaker 1>The problem with that, from where I see it, is

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<v Speaker 1>that there are especially if you need a specialist. If

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<v Speaker 1>you're on Medicare, it can be very Medicare Medicaid, if

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<v Speaker 1>you're on Medicaid, it can be extremely challenging in some

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<v Speaker 1>areas to even find a specialist that accepts Medicaid in

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<v Speaker 1>some fields. So now the incentive would be to see

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<v Speaker 1>those able bodied single adults rather than seeing someone else

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<v Speaker 1>that you're not getting as higher reimbursement for correct.

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<v Speaker 3>Yeah, So, just to be clear, the federal government cuts

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<v Speaker 3>the checks to the state so the state gets that

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<v Speaker 3>money coming in, but those incentives will flow through the

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<v Speaker 3>health sector like you mentioned. So if states are getting

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<v Speaker 3>much more money for the able body of population, their

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<v Speaker 3>incentive is to increase spending on that population. And one

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<v Speaker 3>way they can do that is by setting rates higher

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<v Speaker 3>for services that expansion and rollies are likely to receive,

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<v Speaker 3>then rates the traditional medicaid enrollies would likely receive. So

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<v Speaker 3>you're going to see a resource allocation away from the

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<v Speaker 3>vulnerable to the able body.

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<v Speaker 2>You've been writing a lot lately, Brian.

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<v Speaker 1>You've got a lot of columns at Paragon Health Institute

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<v Speaker 1>its Paragon Institute dot org. I've got links to a

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<v Speaker 1>lot of them on the blog today. And you use

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<v Speaker 1>the word money laundering or the words I guess I

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<v Speaker 1>should say money laundering. I mean that's pretty strong language.

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<v Speaker 1>So where do you where are you seeing this money

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<v Speaker 1>laundering and explain why it fits in that definition.

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<v Speaker 3>Well, unfortunately, what I just described as bad, but it's

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<v Speaker 3>actually far worse in practice because the states don't actually

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<v Speaker 3>have to come up with real spending in order to

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<v Speaker 3>get money from the federal government. The claassic example is

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<v Speaker 3>this thing called a medicaid provider tax, and it's not

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<v Speaker 3>a tax, it's a kickback scheme. The provider, let's say

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<v Speaker 3>a hospital system, will lobby the government to assess this

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<v Speaker 3>tax on them. So let's take some easy numbers. The

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<v Speaker 3>state assesses a million dollar tax on the hospital. They

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<v Speaker 3>take that million dollars and they spend it in a

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<v Speaker 3>Medicaid payment right back on the hospital. That's just the

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<v Speaker 3>million dollars changing hands. But the state will bill the

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<v Speaker 3>federal government for that expenditure, and the federal government will

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<v Speaker 3>kick in an amount to the state. On average that

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<v Speaker 3>amounts about seven hundred thousand dollars. So the state then

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<v Speaker 3>takes that and directs a lot of that money to

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<v Speaker 3>the healthcare sector, although the state can use these funds

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<v Speaker 3>for any purpose. And we wrote a piece on what

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<v Speaker 3>California did with one of these skis where they got

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<v Speaker 3>approval for a massive for a scan that led to

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<v Speaker 3>a massive inflow of federal funds, and then the next

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<v Speaker 3>year they expanded Medicaid to unauthorized immigrants in the state.

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<v Speaker 2>We've done that in Colorado as well.

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<v Speaker 1>We are now offering illegal immigrants, women, pregnant women, and children.

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<v Speaker 1>They are now on Medicaid, which in my mind prevents

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<v Speaker 1>them from being able to get citizenship because one of

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<v Speaker 1>the questions that you have to answer is have you

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<v Speaker 1>ever been on the government doll They ask it nicer

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<v Speaker 1>than that, but that's what it is. So it sounds

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<v Speaker 1>like in Colorado we also have the hospital provider fee

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<v Speaker 1>and things of that nature, fees that serve no purpose, right,

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<v Speaker 1>and we're told we have to have these in order

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<v Speaker 1>to protect rural hospitals or whatever. But now I'm thinking,

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<v Speaker 1>are they just another way to pad the bill because

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<v Speaker 1>all taxes are allowed to be considered healthcare expenses, right, So.

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<v Speaker 3>It's a way for the state and the provider to

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<v Speaker 3>collude and get as much federal Medicaid money as possible.

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<v Speaker 3>So it is. It's an unfortunate so economic actors respond

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<v Speaker 3>to incentives, and the incentives that we've set up in

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<v Speaker 3>Medicaid are for the states to develop these financing schemes

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<v Speaker 3>so that they can pass higher costs for the program

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<v Speaker 3>to the federal taxpayer. So all states do this. So

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<v Speaker 3>we're trapped in this really inefficient equilibrium where all states

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<v Speaker 3>have direct and used these financing schemes, paying off politically

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<v Speaker 3>powerful providers in the state and really destroying conservative governance

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<v Speaker 3>at the state level. So states, if states are one

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<v Speaker 3>of the things that we need conservatives to do is

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<v Speaker 3>figure out priorities and balance budgets. So if we allow

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<v Speaker 3>states to get out of that by when they have

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<v Speaker 3>budget difficulty, just creating a Medicaid money laundering scan so

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<v Speaker 3>that they can get all this Medicaid money coming into

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<v Speaker 3>the state that the state can use for any purposes,

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<v Speaker 3>so they don't need to actually seriously look at whether

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<v Speaker 3>the state budget needs trimming. It destroys government at conservative

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<v Speaker 3>government to state level, and it significantly increases federal deficits

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<v Speaker 3>and depth.

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<v Speaker 1>So let's talk about how big Medicaid got under Joe Biden.

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<v Speaker 1>And part of this is attached to COVID, and you know,

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<v Speaker 1>COVID being the disastrous outlier that it is. Maybe you

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<v Speaker 1>could understand that Medicaid was expanded or whatever, but what

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<v Speaker 1>are the real numbers look like? Because now we're hearing

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<v Speaker 1>lots of people freaking out about the possibility of cutting Medicaid.

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<v Speaker 1>But what happened in those last few years of the

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<v Speaker 1>Biden administration and what does a real.

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<v Speaker 2>Cut look like? Now that would be take us back

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<v Speaker 2>to where we were. I guess is what I'm asking.

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<v Speaker 3>The two main things happened to the Biden administration and

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<v Speaker 3>federal Medicaid spending explode in the Biden administration, one is

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<v Speaker 3>a legacy of COVID. They allowed ineligible people to stay

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<v Speaker 3>on the program much longer than they should have. Like people,

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<v Speaker 3>you know, may have lost their jobs at the start

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<v Speaker 3>of the pandemic and lost their workplace insurance, but most

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<v Speaker 3>people weren't out of work that long and they got

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<v Speaker 3>back to work, and most people get health insurance through

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<v Speaker 3>their employer. Well, the federal government, we just kept paying

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<v Speaker 3>Medicaid coverage for those individuals even though they had left

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<v Speaker 3>the Medicaid roles. So that was one big problem. The

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<v Speaker 3>second big problem is that the Biden administration really exacerbated

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<v Speaker 3>these Medicaid money laundering schemes, and we've seen an explosion

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<v Speaker 3>in them over the last two years. So when we're

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<v Speaker 3>talking about the word cuts, it's very misleading. There would

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<v Speaker 3>be no annual cuts. Spending on Medicaid would increase year

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<v Speaker 3>after year. It's really just slowing the growth rate of

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<v Speaker 3>the program. And we're looking like the reforms that I'm

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<v Speaker 3>advocating for would slower the growth rate from about five

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<v Speaker 3>percentage percent increase year to about three percent in procedure.

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<v Speaker 1>Which is far more manageable in the grand scheme of things.

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<v Speaker 1>What kind of reforms would you like to see? Is

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<v Speaker 1>block grants one of them?

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<v Speaker 3>And I think block grants is the best reform, So

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<v Speaker 3>that would be my sort of the conservative gold standard

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<v Speaker 3>of reforms. We at Paragon have tried to focus on

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<v Speaker 3>what we think are politically feasible reforms. So what we

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<v Speaker 3>want to do is two main things. We want to

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<v Speaker 3>reduce the discrimination that favors the able bodied over the

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<v Speaker 3>most vulnerable. We would phase down the Obamacare expansion rate

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<v Speaker 3>until state's got the same reimbursement rate for able bodied,

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<v Speaker 3>working age adults and for everybody else on the program.

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<v Speaker 3>And then we would significantly limit states ability to money launder.

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<v Speaker 3>We'd cap their ability to engage in these financing schemes,

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<v Speaker 3>and we would limit their ability to pay off providers

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<v Speaker 3>with really excessive payments.

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<v Speaker 1>Can you explain the block grants to my audience? You

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<v Speaker 1>may not be familiar with what's the block grants do?

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<v Speaker 3>Yeah, so, right now, the problem with the program is

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<v Speaker 3>that when states spend more, Washington kicks in more spending,

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<v Speaker 3>so that encourages spending more. What a block rent would

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<v Speaker 3>do is it would cap the amount that states get

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<v Speaker 3>from the federal government, So they'd have a list of

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<v Speaker 3>individuals that they need to provide coverage to their be rules,

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<v Speaker 3>and the federal government provide a contribution. Above that, the

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<v Speaker 3>state could do what they want, but the federal government

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<v Speaker 3>wouldn't be on the hook for any of the expenditure.

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<v Speaker 3>So as an economist, we would say, on the margin,

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<v Speaker 3>states have incentives to care about the value because every

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<v Speaker 3>additional dollar the state would bear the full cost versus

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<v Speaker 3>today where states bear a small fraction of the Medicaid

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<v Speaker 3>spending and which is the main reason why we have

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<v Speaker 3>so much wasteful, inefficient spending in the program.

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<v Speaker 2>I'm a huge fan of block brands.

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<v Speaker 1>I think they're the only way to force sort of

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<v Speaker 1>economic responsibility onto this dates. But how would you and

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<v Speaker 1>you guys have probably thought about this, and I'm not

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<v Speaker 1>smart enough to figure this out, what kind of formula

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<v Speaker 1>would you use to determine that block grant spending on

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<v Speaker 1>a per state basis? Because you have states. I lived

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<v Speaker 1>in Kentucky for three years. When I lived there, it

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<v Speaker 1>was even before the ACA. They still weren't a ninety

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<v Speaker 1>percent reimbursement rate for their medicaid spending because.

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<v Speaker 2>They're a poor state.

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<v Speaker 1>You know, maybe California doesn't need that much, or New

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<v Speaker 1>York doesn't need that or whatever. How do you come

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<v Speaker 1>up with that formula to decide? Okay, State of Colorado,

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<v Speaker 1>we're going to give you twenty billion dollars for medicaid

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<v Speaker 1>and not a penny more.

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<v Speaker 2>How do you figure that out?

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<v Speaker 3>Asking great questions, so kudos to you and your audience

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<v Speaker 3>for getting some smart questions here. I would say the

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<v Speaker 3>current way that they do it is they base it

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<v Speaker 3>off of state per capita income, so states get more

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<v Speaker 3>medicaid spending from the federal government if they have lower

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<v Speaker 3>per capita income. But that's been abused because richer states

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<v Speaker 3>have been able to develop more propagate spending, so richer

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<v Speaker 3>states actually get far more federal spending per person of

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<v Speaker 3>poverty than poorer states. What I would do is base

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<v Speaker 3>it off of the number of people in poverty in

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<v Speaker 3>a state, So I'd say US citizens, So the number

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<v Speaker 3>of US citizens and poverty. I think you would then

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<v Speaker 3>have a federal allocation based on the number of individuals

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<v Speaker 3>and poverty, and you probably make adjustments for cost of living.

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<v Speaker 3>States that are higher cost of living, you know, you

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<v Speaker 3>send somewhat more funds there. But I think that is

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<v Speaker 3>a much more rational structure, where you're targeting the funds

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<v Speaker 3>to something like the number of people in poverty rather

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<v Speaker 3>than the state's ability to manipulate it.

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<v Speaker 1>Would wouldn't block grants just simplify everything so much? I mean,

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<v Speaker 1>wouldn't it just strip away layers and layers and layers

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<v Speaker 1>of federal to state bureaucracy. We hand them a check

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<v Speaker 1>and say, good luck. You know, this is your amount

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<v Speaker 1>of money. Why is this not politically happening right now?

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<v Speaker 1>We've got Republicans trying to you know, force work requirements,

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<v Speaker 1>which I'm one hundred percent in favor of. But this,

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<v Speaker 1>to me, the big bite at the apple is that

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<v Speaker 1>block grant thing. Why can't we get this done? Or

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<v Speaker 1>states just lobbing too hard against it?

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<v Speaker 3>It's a really good question. I mean, it is the

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<v Speaker 3>left sort of us things as as protecting the entitlement

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<v Speaker 3>nature of these programs, and if you are distributing funding

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<v Speaker 3>to states, I think they actually make a lot of

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<v Speaker 3>claims about block grants, which I think are fairly easy

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<v Speaker 3>to refute, they'll say that, you know, if what happens,

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<v Speaker 3>if there's a recession and then states are on the

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<v Speaker 3>hook for this additional spending, well, there's ways to address

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<v Speaker 3>those policies. I would say. It's also one of the

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<v Speaker 3>unfortunate things about policy is that we get stuck in

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<v Speaker 3>sort of the inertia of existing policy for works and

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<v Speaker 3>sort of building off of the inefficiencies in those frameworks.

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<v Speaker 3>I mean, like I said, I'm a big advocate of

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<v Speaker 3>block brands. I think it's the best reform for Medicaid.

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<v Speaker 3>I think in order to implement them in the program,

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<v Speaker 3>you'd have to have bigger Republican majorities than we have

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<v Speaker 3>right now.

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<v Speaker 1>Oh that's disappointing because ultimately, you know, nobody wants poor

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<v Speaker 1>elderly people to not be able to get care. Nobody

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<v Speaker 1>wants someone living with a significant disability to not be

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<v Speaker 1>able to get care. But at the same time, we

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<v Speaker 1>can't just have sort of this blank check given to

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<v Speaker 1>every state, especially now. I mean, and if you read

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<v Speaker 1>Brian's work, and I linked to four different things on

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<v Speaker 1>the blog today that he has written about this, it.

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<v Speaker 2>Will make you insane.

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<v Speaker 1>Because if a private company did anything that the States

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<v Speaker 1>are doing, they would go to jail. I mean, this

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<v Speaker 1>is blatant grift. So why can't we somehow get all

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<v Speaker 1>the politicians in and say, okay, grift is not okay.

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<v Speaker 2>We have to disincentivize this stuff.

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<v Speaker 1>It makes perfect sense to me, and I'm frustrated that

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<v Speaker 1>we can't protect this program for the people who really

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<v Speaker 1>need it while making sure the people that are abusing it,

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<v Speaker 1>either at the state level or by you know, using

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<v Speaker 1>Medicaid when they're perfectly capable of working.

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<v Speaker 2>We've got to just fix this issue.

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<v Speaker 1>What do you think is the biggest what do you

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<v Speaker 1>think has the biggest potential to reform Medicaid in this

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<v Speaker 1>very close congress? Where would you like to see Are

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<v Speaker 1>there ways to nibble around the edges that can have

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<v Speaker 1>any significant impact?

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<v Speaker 2>Yeah?

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<v Speaker 3>So, I mean I think you addressed, like, what are

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<v Speaker 3>the primary problems with the status quo. The fact that

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<v Speaker 3>we're paying seven times the federal government pays seven times

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<v Speaker 3>more for able body and working age adults on the

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<v Speaker 3>program than traditional enrollees is crazy. That should be I mean,

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<v Speaker 3>there should be no discrimination in favor of the able body,

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<v Speaker 3>So addressing that would be a huge win or sort

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<v Speaker 3>of common sense could government reform and then using state's

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<v Speaker 3>ability to engage in these money honoring schemes, like there's

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<v Speaker 3>ways to limit what states can raise to put up

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<v Speaker 3>as the states share. I think that combination would be

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<v Speaker 3>some significant reforms. They're doing other things that I think

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<v Speaker 3>are buying policy. I mean you mentioned work requirements. I

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<v Speaker 3>think ensuring to enable bodied, working age people are working

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<v Speaker 3>or engaged in community service in order to access a

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<v Speaker 3>welfare benefit makes a lot of sense to me.

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<v Speaker 1>Well, Brian, I really appreciate both your work on this

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<v Speaker 1>at the Paragon Institute, and you know you've got to

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<v Speaker 1>You've got to believe at some point that enough people

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<v Speaker 1>will start to say we've got to take care of people,

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<v Speaker 1>but we don't want to be stolen from.

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<v Speaker 2>But it's DC So I just don't know.

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<v Speaker 1>This text asked a question, Brian, do we have any

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<v Speaker 1>idea how many able bodied people are on Medicaid?

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<v Speaker 2>Do we know what those numbers are?

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<v Speaker 3>I mean, the Obamacare expansion enrollies is about twenty million. Oh,

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<v Speaker 3>so that's the bulk of it.

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<v Speaker 2>Holy mackerel.

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<v Speaker 1>I did look up in Colorado our poverty level. Our

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<v Speaker 1>poverty rate is a roughly seven percent, and yet we

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<v Speaker 1>have twenty percent of our population on Medicaid, and I

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<v Speaker 1>think that in and of itself is skewed to me.

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<v Speaker 3>Yeah, at the end of the Reagan administration, there were

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<v Speaker 3>twice as many people in poverty than on medicaid. Now

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<v Speaker 3>we have twice as many people on Medicaid as in poverty.

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<v Speaker 3>There's actually more people on Medicaid who have they come

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<v Speaker 3>above the poverty line than people on Medicaid who think

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<v Speaker 3>come below the poverty line.

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<v Speaker 1>Holy cow, that is appalling, absolutely appalling. Brian Blaze. I

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<v Speaker 1>appreciate your time, but now I'm aggravated. So maybe I

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<v Speaker 1>didn't want to do this interview because now I'm frustrated.

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<v Speaker 1>Keep doing what you're doing, and I'm going to keep

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<v Speaker 1>spreading the word here. But wow, that's staggering. I can't

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<v Speaker 1>even believe that. That's nuts.

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<v Speaker 3>Sorry to frustrating.

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<v Speaker 2>No, I appreciate you, Brian, Thanks for coming on the

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<v Speaker 2>show today.

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<v Speaker 3>All right, thank you?

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<v Speaker 2>All right.

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<v Speaker 1>That is Brian Blaze with the Paragon Health Institute. They're

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<v Speaker 1>looking for free market solutions and they do really, really

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<v Speaker 1>good work. They have a newsletter that you can sign

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<v Speaker 1>up for if you're a nerd like me and you

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<v Speaker 1>want to kind of keep in uh, you know, up up.

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<v Speaker 2>To speed here.

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<v Speaker 1>So wow, that's crazy, absolutely crazy,