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The Real Results of ObamaCare and Medicaid Expansion

11/28/2017

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In 2013, Nevada expanded Medicaid eligibility, a move promoted by the federal Affordable Care Act (ACA or ObamaCare) to improve health care to people allegedly then under-served by our health care systems.
In return, the federal government fully funded Nevada’s increased costs through 2016.  However, the federal reimbursements slowly decline beginning this year.  With the over-spending problems faced by the federal government, there is serious question whether reimbursements will continue after 2020, and if so at what level.
Federal government failure to continue its support could cause Nevada problems with its own budget.  However, whatever Medicaid’s cost to Nevada taxpayers, its advocates always asserted it would provide significant benefits of “access” to care that was lacking.  They didn’t even attempt to support their benefit claims – they just asserted them.

Now, research findings by scholars at Stanford and Pennsylvania’s Wharton School and elsewhere are calling into question even the alleged benefits.

Wharton professor Atul Gupta said, “we always knew that the ACA is a massive redistribution exercise – redistributing from the healthy to the sick, redistributing from the rich to the poor.  But what we’re finding here is that it’s also a redistribution in terms of who is paying for these costs. We’re finding that local tax dollars are now being replaced by federal tax dollars.”

He explained that some people who gained Medicaid coverage were earlier covered by other insurance and county indigent programs.  “About 40 percent of the Medicaid expansion is going towards replacing county indigent insurance,” according to Gupta.

“We tried to look at whether this has resulted in improvement in health care outcomes for patients.  In many ways, that is the bottom line we’re interested in.”  He continued, “On this front, we don’t find robust evidence of improvement in the quality of health.”

He added: “when you read the popular media, it’s almost taken as a given that expanding insurance coverage is good.”  However, “it hasn’t really shown up in the data in very carefully designed studies.  We’re not finding robust evidence in our study as well.  … This is known as crowding out of insurance coverage.”

The Stanford/Wharton study analyzed data from 2008 to 2015 gathered from hospitals and emergency rooms in California.  It focused on the behaviors of young people whose coverage provisions were increased by the Medicaid expansion.  So, it doesn’t address all experience with the expansion and it can’t yet cover long-term effects.  Nonetheless, it agrees with other carefully designed studies that the actual benefits are much less than assumed by ObamaCare and Medicaid advocates.

Gupta does sound some hopeful notes.  In particular, he says the study shows Medicaid has allowed some poor people who previously had coverage now have more choice of providers, leading them to move from public to private hospitals and better physicians.

“I think it’s reasonable to at least examine the evidence and see what kind of bang we’re getting for this buck,” he notes.

We think so, too, especially in Nevada.  As reported in our 2016 Popular Annual Financial Report, Medicaid is the largest single state expenditure at $3.2-billion, or 29 percent of total state spending.  And health and social services spending, driven mainly by Medicaid expansion, has been the fastest growing part of state spending by far, now topping $5.111-billion, or 47 percent of the total.

As we also noted, expansion of publicly funded health care has been accompanied by a decline in rates of private insurance coverage.  We also observed that expanded Medicaid coverage does not improve objective health care outcomes and only further endangers the most vulnerable populations.

ObamaCare, Medicaid expansion, single-payer systems and other progressive schemes are all driven by simplistic narratives, not tough-minded analysis of experience and costs, risks and benefits.

In this case there were two false narratives.  First, all people subsidized by ObamaCare don’t have access to care and thus suffer greatly.  Second, screwing up the whole health insurance system to provide such access will have no unanticipated negative consequences – and will likely milk the well off and prudent people to subsidize recipients of public largess, allowing progressives to take credit because they forced others to pay for it.
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So, expensive progressive politics are now blowing up in taxpayers’ faces.
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The Real Issues in Federal Tax Reform

11/7/2017

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Republicans in the house of representatives have introduced their tax bill, and congress and the president intend to pass some version of tax reform promptly.  As folks consider the details and try to craft a package that will pass, let’s first remind ourselves what are the main principles, goals and problems facing tax reform.

The key goal is always economic growth.  Growing the economy at a sustainably fast clip means on average everyone is better off and each person or family has more opportunity to improve their lot.  It also allows us to afford more of the public goods that government can supply, including caring for the needy.

Moreover, generally the policies that promote growth are also those that are fair among individuals.  Thus, lowering the overall burden of taxes allows people to retain more of the fruits of their labor and savings and investment, which is inherently fair.  For all these reasons, economic growth is the lodestar for public policy.

The general principles that should guide growth-oriented income tax reform are use of broad tax bases with low rates, especially the “marginal” rates that apply to one’s last dollar earned.  Also, special provisions (exemptions, credits, etc.) for businesses and personal taxpayers distort their decisions away from choices that promote growth and are fair.

Counter-intuitively to some folks, levying taxes directly more on natural people and less on business corporations is also growth inducing.  Martin Feldstein, the eminent Harvard economist, wrote in the Wall Street Journal this week that corporate tax reform is the key to growth, as students of tax policy know.  He said the most important reform is to cut the corporate from our present 35 percent, which is the highest among major industrial nations to 20 percent or less.

Further, a paper last month by the non-partisan Tax Foundation reviewed the theoretical and empirical studies over many years and concluded that labor bears much more of the burden of corporate taxes via reduced wages and increased unemployment than does capital (investors) via reduced profits.  To the extent corporate taxes raise costs of production, consumers also bear part of the burden and economic growth suffers.

So, getting the corporate marginal tax rate down to 20 percent or lower is the most important thing in this reform.  Among other things, doing so will greatly reduce the problems of U.S. businesses leaving profits they earn in other countries there or in tax havens.  When these earnings are repatriated, we will enjoy a permanent growth surge due to increased investment.

While reform reduces marginal corporate rates and tax revenues, it is important to stop the growth of deficits and national debt, which have gotten quite out of hand.  Deficits and debt themselves are not the problem, but rather the very high levels they’ve reached in recent years.

To a great extent, reduced taxes will themselves accelerate growth and thus replace some tax revenues lost to lower rates.  However, the bulk of the deficit and debt problem must be solved via slowed spending growth because government spending at all levels is so high it substantially slows economic growth.

Why is tax reform so difficult that we’ve been unable to make any meaningful progress on it over the last 30 years?  Public choice theory explains this quite well.

The special interests that benefit from exemptions, deductions and credits available only to some parties are few in number, but each member of the group has a large stake in keeping these provisions.  On the other hand, the beneficiaries of tax reform that replaces them with lower rates and broader bases are many in number with each beneficiary having generally a small average stake in the outcome.
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Hence, the defenders of the provisions that need reform are easily able to organize into industry and other interest groups because they are few and their large individual stakes make it worth their while to hire consultants, lawyers and lobbyists to press their case.  The large number of people supporting the public-interest reforms and their small individual stakes means they generally can’t even get meaningfully represented.
Reform will succeed if republicans stand up to the special interests and for the public interest by cutting marginal corporate tax rates.
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    *Opinions expressed here may or may not reflect the views of the Lyon County Republican Central Committee. 

    Author

    Ron Knecht has served as Nevada Controller, a higher education regent, legislator and economist. He can be reached at RonKnecht@aol.com.  
     

     

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