Speaker 1: And there's a lot of talk about Medicaid cuts and
Speaker 1: people are saying, if Medicaid is cut, people are going
Speaker 1: to die.
Speaker 2: And I thought I would.
Speaker 1: Bring somebody on who has been really kind of doing
Speaker 1: a deep dive for many years on medicaid spending and
Speaker 1: recently on the tremendous growth of medicaid spending under the
Speaker 1: last few years of the Biden administration, and joining me
Speaker 1: now from the Paragon Health Institute.
Speaker 2: He is the president.
Speaker 1: Brian Blaze joins me today. Brian, good to see you again.
Speaker 3: Great to be with you.
Speaker 2: So can we start at the beginning for just a moment.
Speaker 1: Let's go back to the ACA, the Affordable Care Act
Speaker 1: Obamacare as.
Speaker 2: Most people know it.
Speaker 1: What happened there that has created the growth of Medicaid
Speaker 1: that we're sort of trying to reel in now.
Speaker 3: Yeah. So, Medicaid is a joint federal state program and
Speaker 3: it used to be for for like vulnerable populations, children,
Speaker 3: pregnant moms, people with disabilities, that have low income. Obamacare's
Speaker 3: aim was to dramatically expand the number of people that
Speaker 3: had health insurance coverage, and it mainly did that by
Speaker 3: expanding Medicaid to able bodied, working age childless adults. And
Speaker 3: one of the keys with Obamacare is that it created
Speaker 3: much more generous terms for states. So basically, the federal
Speaker 3: government pays all of state spending on this able bodied,
Speaker 3: working age expansion population. So the federal government has created
Speaker 3: a discriminatory structure where states get much more money seven
Speaker 3: times more money from the federal government for a dollar
Speaker 3: of spending on able bodied, working age adults than spending
Speaker 3: on traditional enrollees like children, people with disabilities.
Speaker 1: Wait, I did not know what you just said, because
Speaker 1: I'm very well versed in the fact that different states
Speaker 1: get different levels of Medicaid reimbursement. Some states it's as
Speaker 1: high as ninety percent, other states it's sixty percent. Somewhere
Speaker 1: in that window, right, But you're telling me that we've
Speaker 1: actually incentivized by offering more money from the federal government
Speaker 1: more services for able bodied single adults than we are
Speaker 1: offering to single mothers or children or the very poor elderly.
Speaker 1: So there's more incentive to take care of those people
Speaker 1: first because you're going to get more money out of it.
Speaker 3: Yeah, it's very moral. It's a perverse funding structure. When
Speaker 3: Obamacare was created, the federal government paid all of the costs.
Speaker 3: Now they pay ninety percent of the costs for the
Speaker 3: able bodied working age population. Another way to think about
Speaker 3: that is, if states spend a dollar of their own
Speaker 3: money on able body working age Medicaid rollies, the federal
Speaker 3: government sends the state nine dollars on average for traditional
Speaker 3: medicaid and rollies. When states spend a dollar, Washington will
Speaker 3: contribute a dollar thirty three. So nine dollars is seven
Speaker 3: times a dollar thirty three. So states have huge incentives
Speaker 3: to direct more medicaid resources to the able bodied childless
Speaker 3: population because the federal government is sending much greater resources
Speaker 3: to the state.
Speaker 1: The problem with that, from where I see it, is
Speaker 1: that there are especially if you need a specialist. If
Speaker 1: you're on Medicare, it can be very Medicare Medicaid, if
Speaker 1: you're on Medicaid, it can be extremely challenging in some
Speaker 1: areas to even find a specialist that accepts Medicaid in
Speaker 1: some fields. So now the incentive would be to see
Speaker 1: those able bodied single adults rather than seeing someone else
Speaker 1: that you're not getting as higher reimbursement for correct.
Speaker 3: Yeah, So, just to be clear, the federal government cuts
Speaker 3: the checks to the state so the state gets that
Speaker 3: money coming in, but those incentives will flow through the
Speaker 3: health sector like you mentioned. So if states are getting
Speaker 3: much more money for the able body of population, their
Speaker 3: incentive is to increase spending on that population. And one
Speaker 3: way they can do that is by setting rates higher
Speaker 3: for services that expansion and rollies are likely to receive,
Speaker 3: then rates the traditional medicaid enrollies would likely receive. So
Speaker 3: you're going to see a resource allocation away from the
Speaker 3: vulnerable to the able body.
Speaker 2: You've been writing a lot lately, Brian.
Speaker 1: You've got a lot of columns at Paragon Health Institute
Speaker 1: its Paragon Institute dot org. I've got links to a
Speaker 1: lot of them on the blog today. And you use
Speaker 1: the word money laundering or the words I guess I
Speaker 1: should say money laundering. I mean that's pretty strong language.
Speaker 1: So where do you where are you seeing this money
Speaker 1: laundering and explain why it fits in that definition.
Speaker 3: Well, unfortunately, what I just described as bad, but it's
Speaker 3: actually far worse in practice because the states don't actually
Speaker 3: have to come up with real spending in order to
Speaker 3: get money from the federal government. The claassic example is
Speaker 3: this thing called a medicaid provider tax, and it's not
Speaker 3: a tax, it's a kickback scheme. The provider, let's say
Speaker 3: a hospital system, will lobby the government to assess this
Speaker 3: tax on them. So let's take some easy numbers. The
Speaker 3: state assesses a million dollar tax on the hospital. They
Speaker 3: take that million dollars and they spend it in a
Speaker 3: Medicaid payment right back on the hospital. That's just the
Speaker 3: million dollars changing hands. But the state will bill the
Speaker 3: federal government for that expenditure, and the federal government will
Speaker 3: kick in an amount to the state. On average that
Speaker 3: amounts about seven hundred thousand dollars. So the state then
Speaker 3: takes that and directs a lot of that money to
Speaker 3: the healthcare sector, although the state can use these funds
Speaker 3: for any purpose. And we wrote a piece on what
Speaker 3: California did with one of these skis where they got
Speaker 3: approval for a massive for a scan that led to
Speaker 3: a massive inflow of federal funds, and then the next
Speaker 3: year they expanded Medicaid to unauthorized immigrants in the state.
Speaker 2: We've done that in Colorado as well.
Speaker 1: We are now offering illegal immigrants, women, pregnant women, and children.
Speaker 1: They are now on Medicaid, which in my mind prevents
Speaker 1: them from being able to get citizenship because one of
Speaker 1: the questions that you have to answer is have you
Speaker 1: ever been on the government doll They ask it nicer
Speaker 1: than that, but that's what it is. So it sounds
Speaker 1: like in Colorado we also have the hospital provider fee
Speaker 1: and things of that nature, fees that serve no purpose, right,
Speaker 1: and we're told we have to have these in order
Speaker 1: to protect rural hospitals or whatever. But now I'm thinking,
Speaker 1: are they just another way to pad the bill because
Speaker 1: all taxes are allowed to be considered healthcare expenses, right, So.
Speaker 3: It's a way for the state and the provider to
Speaker 3: collude and get as much federal Medicaid money as possible.
Speaker 3: So it is. It's an unfortunate so economic actors respond
Speaker 3: to incentives, and the incentives that we've set up in
Speaker 3: Medicaid are for the states to develop these financing schemes
Speaker 3: so that they can pass higher costs for the program
Speaker 3: to the federal taxpayer. So all states do this. So
Speaker 3: we're trapped in this really inefficient equilibrium where all states
Speaker 3: have direct and used these financing schemes, paying off politically
Speaker 3: powerful providers in the state and really destroying conservative governance
Speaker 3: at the state level. So states, if states are one
Speaker 3: of the things that we need conservatives to do is
Speaker 3: figure out priorities and balance budgets. So if we allow
Speaker 3: states to get out of that by when they have
Speaker 3: budget difficulty, just creating a Medicaid money laundering scan so
Speaker 3: that they can get all this Medicaid money coming into
Speaker 3: the state that the state can use for any purposes,
Speaker 3: so they don't need to actually seriously look at whether
Speaker 3: the state budget needs trimming. It destroys government at conservative
Speaker 3: government to state level, and it significantly increases federal deficits
Speaker 3: and depth.
Speaker 1: So let's talk about how big Medicaid got under Joe Biden.
Speaker 1: And part of this is attached to COVID, and you know,
Speaker 1: COVID being the disastrous outlier that it is. Maybe you
Speaker 1: could understand that Medicaid was expanded or whatever, but what
Speaker 1: are the real numbers look like? Because now we're hearing
Speaker 1: lots of people freaking out about the possibility of cutting Medicaid.
Speaker 1: But what happened in those last few years of the
Speaker 1: Biden administration and what does a real.
Speaker 2: Cut look like? Now that would be take us back
Speaker 2: to where we were. I guess is what I'm asking.
Speaker 3: The two main things happened to the Biden administration and
Speaker 3: federal Medicaid spending explode in the Biden administration, one is
Speaker 3: a legacy of COVID. They allowed ineligible people to stay
Speaker 3: on the program much longer than they should have. Like people,
Speaker 3: you know, may have lost their jobs at the start
Speaker 3: of the pandemic and lost their workplace insurance, but most
Speaker 3: people weren't out of work that long and they got
Speaker 3: back to work, and most people get health insurance through
Speaker 3: their employer. Well, the federal government, we just kept paying
Speaker 3: Medicaid coverage for those individuals even though they had left
Speaker 3: the Medicaid roles. So that was one big problem. The
Speaker 3: second big problem is that the Biden administration really exacerbated
Speaker 3: these Medicaid money laundering schemes, and we've seen an explosion
Speaker 3: in them over the last two years. So when we're
Speaker 3: talking about the word cuts, it's very misleading. There would
Speaker 3: be no annual cuts. Spending on Medicaid would increase year
Speaker 3: after year. It's really just slowing the growth rate of
Speaker 3: the program. And we're looking like the reforms that I'm
Speaker 3: advocating for would slower the growth rate from about five
Speaker 3: percentage percent increase year to about three percent in procedure.
Speaker 1: Which is far more manageable in the grand scheme of things.
Speaker 1: What kind of reforms would you like to see? Is
Speaker 1: block grants one of them?
Speaker 3: And I think block grants is the best reform, So
Speaker 3: that would be my sort of the conservative gold standard
Speaker 3: of reforms. We at Paragon have tried to focus on
Speaker 3: what we think are politically feasible reforms. So what we
Speaker 3: want to do is two main things. We want to
Speaker 3: reduce the discrimination that favors the able bodied over the
Speaker 3: most vulnerable. We would phase down the Obamacare expansion rate
Speaker 3: until state's got the same reimbursement rate for able bodied,
Speaker 3: working age adults and for everybody else on the program.
Speaker 3: And then we would significantly limit states ability to money launder.
Speaker 3: We'd cap their ability to engage in these financing schemes,
Speaker 3: and we would limit their ability to pay off providers
Speaker 3: with really excessive payments.
Speaker 1: Can you explain the block grants to my audience? You
Speaker 1: may not be familiar with what's the block grants do?
Speaker 3: Yeah, so, right now, the problem with the program is
Speaker 3: that when states spend more, Washington kicks in more spending,
Speaker 3: so that encourages spending more. What a block rent would
Speaker 3: do is it would cap the amount that states get
Speaker 3: from the federal government, So they'd have a list of
Speaker 3: individuals that they need to provide coverage to their be rules,
Speaker 3: and the federal government provide a contribution. Above that, the
Speaker 3: state could do what they want, but the federal government
Speaker 3: wouldn't be on the hook for any of the expenditure.
Speaker 3: So as an economist, we would say, on the margin,
Speaker 3: states have incentives to care about the value because every
Speaker 3: additional dollar the state would bear the full cost versus
Speaker 3: today where states bear a small fraction of the Medicaid
Speaker 3: spending and which is the main reason why we have
Speaker 3: so much wasteful, inefficient spending in the program.
Speaker 2: I'm a huge fan of block brands.
Speaker 1: I think they're the only way to force sort of
Speaker 1: economic responsibility onto this dates. But how would you and
Speaker 1: you guys have probably thought about this, and I'm not
Speaker 1: smart enough to figure this out, what kind of formula
Speaker 1: would you use to determine that block grant spending on
Speaker 1: a per state basis? Because you have states. I lived
Speaker 1: in Kentucky for three years. When I lived there, it
Speaker 1: was even before the ACA. They still weren't a ninety
Speaker 1: percent reimbursement rate for their medicaid spending because.
Speaker 2: They're a poor state.
Speaker 1: You know, maybe California doesn't need that much, or New
Speaker 1: York doesn't need that or whatever. How do you come
Speaker 1: up with that formula to decide? Okay, State of Colorado,
Speaker 1: we're going to give you twenty billion dollars for medicaid
Speaker 1: and not a penny more.
Speaker 2: How do you figure that out?
Speaker 3: Asking great questions, so kudos to you and your audience
Speaker 3: for getting some smart questions here. I would say the
Speaker 3: current way that they do it is they base it
Speaker 3: off of state per capita income, so states get more
Speaker 3: medicaid spending from the federal government if they have lower
Speaker 3: per capita income. But that's been abused because richer states
Speaker 3: have been able to develop more propagate spending, so richer
Speaker 3: states actually get far more federal spending per person of
Speaker 3: poverty than poorer states. What I would do is base
Speaker 3: it off of the number of people in poverty in
Speaker 3: a state, So I'd say US citizens, So the number
Speaker 3: of US citizens and poverty. I think you would then
Speaker 3: have a federal allocation based on the number of individuals
Speaker 3: and poverty, and you probably make adjustments for cost of living.
Speaker 3: States that are higher cost of living, you know, you
Speaker 3: send somewhat more funds there. But I think that is
Speaker 3: a much more rational structure, where you're targeting the funds
Speaker 3: to something like the number of people in poverty rather
Speaker 3: than the state's ability to manipulate it.
Speaker 1: Would wouldn't block grants just simplify everything so much? I mean,
Speaker 1: wouldn't it just strip away layers and layers and layers
Speaker 1: of federal to state bureaucracy. We hand them a check
Speaker 1: and say, good luck. You know, this is your amount
Speaker 1: of money. Why is this not politically happening right now?
Speaker 1: We've got Republicans trying to you know, force work requirements,
Speaker 1: which I'm one hundred percent in favor of. But this,
Speaker 1: to me, the big bite at the apple is that
Speaker 1: block grant thing. Why can't we get this done? Or
Speaker 1: states just lobbing too hard against it?
Speaker 3: It's a really good question. I mean, it is the
Speaker 3: left sort of us things as as protecting the entitlement
Speaker 3: nature of these programs, and if you are distributing funding
Speaker 3: to states, I think they actually make a lot of
Speaker 3: claims about block grants, which I think are fairly easy
Speaker 3: to refute, they'll say that, you know, if what happens,
Speaker 3: if there's a recession and then states are on the
Speaker 3: hook for this additional spending, well, there's ways to address
Speaker 3: those policies. I would say. It's also one of the
Speaker 3: unfortunate things about policy is that we get stuck in
Speaker 3: sort of the inertia of existing policy for works and
Speaker 3: sort of building off of the inefficiencies in those frameworks.
Speaker 3: I mean, like I said, I'm a big advocate of
Speaker 3: block brands. I think it's the best reform for Medicaid.
Speaker 3: I think in order to implement them in the program,
Speaker 3: you'd have to have bigger Republican majorities than we have
Speaker 3: right now.
Speaker 1: Oh that's disappointing because ultimately, you know, nobody wants poor
Speaker 1: elderly people to not be able to get care. Nobody
Speaker 1: wants someone living with a significant disability to not be
Speaker 1: able to get care. But at the same time, we
Speaker 1: can't just have sort of this blank check given to
Speaker 1: every state, especially now. I mean, and if you read
Speaker 1: Brian's work, and I linked to four different things on
Speaker 1: the blog today that he has written about this, it.
Speaker 2: Will make you insane.
Speaker 1: Because if a private company did anything that the States
Speaker 1: are doing, they would go to jail. I mean, this
Speaker 1: is blatant grift. So why can't we somehow get all
Speaker 1: the politicians in and say, okay, grift is not okay.
Speaker 2: We have to disincentivize this stuff.
Speaker 1: It makes perfect sense to me, and I'm frustrated that
Speaker 1: we can't protect this program for the people who really
Speaker 1: need it while making sure the people that are abusing it,
Speaker 1: either at the state level or by you know, using
Speaker 1: Medicaid when they're perfectly capable of working.
Speaker 2: We've got to just fix this issue.
Speaker 1: What do you think is the biggest what do you
Speaker 1: think has the biggest potential to reform Medicaid in this
Speaker 1: very close congress? Where would you like to see Are
Speaker 1: there ways to nibble around the edges that can have
Speaker 1: any significant impact?
Speaker 2: Yeah?
Speaker 3: So, I mean I think you addressed, like, what are
Speaker 3: the primary problems with the status quo. The fact that
Speaker 3: we're paying seven times the federal government pays seven times
Speaker 3: more for able body and working age adults on the
Speaker 3: program than traditional enrollees is crazy. That should be I mean,
Speaker 3: there should be no discrimination in favor of the able body,
Speaker 3: So addressing that would be a huge win or sort
Speaker 3: of common sense could government reform and then using state's
Speaker 3: ability to engage in these money honoring schemes, like there's
Speaker 3: ways to limit what states can raise to put up
Speaker 3: as the states share. I think that combination would be
Speaker 3: some significant reforms. They're doing other things that I think
Speaker 3: are buying policy. I mean you mentioned work requirements. I
Speaker 3: think ensuring to enable bodied, working age people are working
Speaker 3: or engaged in community service in order to access a
Speaker 3: welfare benefit makes a lot of sense to me.
Speaker 1: Well, Brian, I really appreciate both your work on this
Speaker 1: at the Paragon Institute, and you know you've got to
Speaker 1: You've got to believe at some point that enough people
Speaker 1: will start to say we've got to take care of people,
Speaker 1: but we don't want to be stolen from.
Speaker 2: But it's DC So I just don't know.
Speaker 1: This text asked a question, Brian, do we have any
Speaker 1: idea how many able bodied people are on Medicaid?
Speaker 2: Do we know what those numbers are?
Speaker 3: I mean, the Obamacare expansion enrollies is about twenty million. Oh,
Speaker 3: so that's the bulk of it.
Speaker 2: Holy mackerel.
Speaker 1: I did look up in Colorado our poverty level. Our
Speaker 1: poverty rate is a roughly seven percent, and yet we
Speaker 1: have twenty percent of our population on Medicaid, and I
Speaker 1: think that in and of itself is skewed to me.
Speaker 3: Yeah, at the end of the Reagan administration, there were
Speaker 3: twice as many people in poverty than on medicaid. Now
Speaker 3: we have twice as many people on Medicaid as in poverty.
Speaker 3: There's actually more people on Medicaid who have they come
Speaker 3: above the poverty line than people on Medicaid who think
Speaker 3: come below the poverty line.
Speaker 1: Holy cow, that is appalling, absolutely appalling. Brian Blaze. I
Speaker 1: appreciate your time, but now I'm aggravated. So maybe I
Speaker 1: didn't want to do this interview because now I'm frustrated.
Speaker 1: Keep doing what you're doing, and I'm going to keep
Speaker 1: spreading the word here. But wow, that's staggering. I can't
Speaker 1: even believe that. That's nuts.
Speaker 3: Sorry to frustrating.
Speaker 2: No, I appreciate you, Brian, Thanks for coming on the
Speaker 2: show today.
Speaker 3: All right, thank you?
Speaker 2: All right.
Speaker 1: That is Brian Blaze with the Paragon Health Institute. They're
Speaker 1: looking for free market solutions and they do really, really
Speaker 1: good work. They have a newsletter that you can sign
Speaker 1: up for if you're a nerd like me and you
Speaker 1: want to kind of keep in uh, you know, up up.
Speaker 2: To speed here.
Speaker 1: So wow, that's crazy, absolutely crazy,