A Healthcare Plan that the Founding Fathers Might Approve – Part II

Having started with a plan that treats all natural-born citizens equally from birth, what would the Founding Fathers do next?

It is difficult to believe that the Founding Fathers would have envisioned the implementation of Social Security, Medicare or Medicaid. If they did, given their backgrounds and the ideals that inspired the Declaration of Independence and the Constitution, it seems likely that many of them, such as Benjamin Franklin, would view Social Security and Medicare differently from Medicaid.

Article I, Section 8 of the Constitution states that “Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

The Tenth Amendment to the Constitution states that the “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

From a purely Constitutional view, Social Security and Medicare are funded at least in part through taxes, specifically payroll taxes. Congress explicitly has the “power to lay and collect taxes”, and there is a clear, if partial, nexus between an individual “paying into” Social Security and Medicare prior to receiving benefits from those programs.

Medicaid, however, is distinctly different from Social Security and Medicare. Instead of being funded directly by the Federal government primarily through payroll taxes, it is funded jointly by the Federal government and the states.

The Founding Fathers would likely consider something that was funded jointly by the Federal government and the states to be subject to the Tenth Amendment by definition, if not process of elimination. In turn, the Founding Fathers would think “block grant” funding for Medicaid by the Federal government to the states complied with the Tenth Amendment. On the other hand, I imagine the Founding Fathers would be particularly troubled by the way in which Medicaid is currently funded, and they might even think it is unconstitutional.

The Kaiser Family Foundation summarizes it best:

“The Federal government guarantees matching funds to states for qualifying Medicaid expenditures; states are guaranteed at least $1 in federal funds for every $1 in state spending on the program… In some instances, Medicaid provides a higher matching rate for select services or populations, the most notable being the ACA Medicaid expansion enhanced match rate. For those states that expand, the federal government will pay 100 percent of Medicaid costs of those newly eligible from 2014 to 2016. The federal share gradually phases down to 90 percent in 2020 and remains at that level.”

The phrase “at least” is critically important. Medicaid is both a revenue source for state governments, i.e., the Federal matching funds, and an expense. Some states receive almost $3 in “federal matching funds” for every $1 the state spends, as the following graph depicts:

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Chris Conover’s recent article in Forbes details a number of the perverse incentives that FMAP creates. I agree with him, but my main objection is that the political class and national media know this, and yet they obfuscate in pursuit of headlines.
In the words of Public Enemy, “false media, we don’t need it do we…don’t believe the hype”. The current “debate” over Medicaid “cuts” in AHCA or BCRA is “fake news”. Serious people are not discussing “cutting” Medicaid spending. The question facing America is how fast Medicaid will grow, and at what cost to other initiatives, such as education.

Medicaid has grown from 0.5 percent of GDP in 1970 to 2.9 percent of GDP in 2014. Importantly, the GDP in 1970 was $1T; in 2014 the GDP was $17.4T. This graph from the Congressional Budget Office demonstrates the recent trend and current projected increases in Medicaid spending by the Federal government:

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As a recent editorial  in The Wall Street Journal points out:

“Some 43% of the Ohio all-funds budget goes to Medicaid compared to a mere 14% for K-12 education. The average state all-funds Medicaid share is 28%. Does Mr. Kasich think this is the correct fiscal priority for America’s future—skimp on educating the next generation to finance free health care for able-bodied adults?”
There are other questions as well.

Is the current way in which Medicaid is funded even constitutional? If it is constitutional, should the Federal government use the funding of healthcare for the poor and disabled as a “carrot and stick” approach to policy at a state level? Other than people who work in Washington, D.C. and Baltimore, who believes that a small group of technocrats in Washington, D.C. and Baltimore should determine healthcare policy for the rest of America? How many people at CMS have been to Greenville, Texas and Greenville, Tennessee and Greenville, South Carolina and Greenville, California and Greenville, Alabama and Greenville, Massachusetts to understand the differences in the healthcare needs and infrastructure just in towns named Greenville? Do people in Washington, D.C. understand that there are certain clinical attributes of the largest population of Clarksdale, Mississippi that are almost identical to the largest population in Fall River, Massachusetts? More importantly, does CMS treat those ethnically and culturally distinct but clinically identical population the same way?

Medicaid was originally designed for the poor disabled. As much as the Founding Fathers held certain “truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”, they would also undoubtedly recognize that those who are created equally often end up unequal with respect to economic, physical and mental health.

I have no doubt that my oldest son was endowed by his Creator with certain unalienable rights, but I also am acutely aware that he was born with Duchenne muscular dystrophy, a gradually disabling and ultimately terminal disease. As a result of his disability, my son was exactly the person for whom Medicaid was created. Although I bore the financial costs of caring for him from his diagnosis until he turned 18, I was grateful for the assistance that Medicaid and Social Security provided the last 20 months of his life. Even as I felt a sense of relief for the benefits to which he was entitled by law, I felt a sense of guilt knowing that those resources came from someone else.

It is ironic that a program designed for the poor and disabled has become so enormous that the political class is constitutionally incapable of doing right by the poor and disabled. The greed that reveals itself in the “policy-making” for national defense is unseemly enough; to see that behavior around a program for the poor and disabled is abhorrent.

Does America have the resources to care for children and the physically and mentally disabled? Of course. Does the current financing of those resources through Medicaid create perverse incentives for behavior that is not solely focused on caring for children and the poor and the disabled? Absolutely. Do the taxpayers in Tennessee deserve to know the truth about Medicaid funding? Yes. Do the people who live in Tennessee have a better sense of the healthcare needs of the residents of the State of Tennessee than the people who work in Washington, D.C. and Baltimore? Certainly. Can the State of Tennessee afford to have Medicaid consume an ever-larger part of the budget without any limits? Certainly not. Does anyone in Washington, D.C. realize that the intensity of the fight about Medicaid reveals that the Federal government is not doing a very good job with Medicaid? Apparently not.
Perhaps the Founding Fathers were quite prescient when it came to the Tenth Amendment…
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[1] Trends in Medicaid Spending, https://www.macpac.gov/wp-content/uploads/2016/06/Trends-in-Medicaid-Spending.pdf