The Feehery Theory

On Friday, America celebrates National Asteroid Day.

Coincidentally, the Senate may complete action on its ObamaCare repeal-and-replace plan the same day.

National Asteroid Day functions to warn people that asteroids might destroy civilization. Democrats warn that Senate Majority Leader Mitch McConnell’s (R-Ky.) healthcare bill will do precisely the same thing, by cutting Medicaid funding by billions of dollars.

Get ready for the hyperbole from both the asteroid watchers and liberal activists.

Sen. Ben Sasse (R-Neb.) called the Republican effort basically a big reform of Medicaid.

If that is the case, then every Republican and every fiscally prudent Democrat, if there are any left, should vote for it.

If ever there was a federal program that desperately needs reform, it is the Medicaid program.

Medicaid has a weird history.

It passed as an amendment to the Social Security Act in 1965, along with a little program called Medicare, signed into law by President Lyndon B. Johnson as part of the Great Society.

Medicare is a middle-class entitlement, meant for middle-class people.

Medicaid is a welfare program, meant for people who can’t afford to take care of themselves.

Medicare is a federal responsibility. The feds pay for it, tax for it and have complete responsibility for implementing it.

Medicaid is a shared responsibility between the federal government and the states.

The federal government gives the states money and a to-do list, a set of requirements for how to spend the money.

The states don’t have to opt in to the Medicaid program.  They can check out any time they like, but like the Hotel California, they never leave.

Because the Medicaid program is jointly administered by the federal and state governments, the potential for game-playing is immense. The states, burdened by balanced budget requirements in their various constitutions, look for any angle to bilk the federal government of as much money as possible.

The accounting games played by these folks, often sanctioned by their state’s representatives and senators, leads to more money being shifted to the federal government for the ultimate payment.

Outside of the accounting games, the Medicaid system is rife with even more fraud.  The American Action Forum, a center-right think tank, said this about the program:

Medicaid has been on the Government Accountability Office’s (GAO) list of high-risk programs since 2003 because of its high improper payment rate, consistently ranking second among federal programs with the highest improper payment rates. Since 2008, Medicaid’s improper payment rate has averaged 8.4 percent, resulting in $161 billion worth of improper payments and accounting for more than 17 percent of all improper payments made by the federal government.

A billion dollars in fraud is a lot of money. One hundred sixty-one billion dollars in fraud is a travesty.  And that number doesn’t include the routine fraud that occurs by a system that is governed not by market principles, but rather by government largesse.

Why take care about cost containment if somebody else is footing the bill?

Conservatives and progressives have historically disagreed about who best can administer Medicaid. Conservatives think the states can do it, while progressives want more federal involvement.

When President Barack Obama dangled more money to the states for Medicaid expansion as part of the Affordable Care Act, that promise of more money included more federal requirements, including an expansion of eligibility requirements. Making more people eligible for Medicaid costs a lot more money.

Indeed, it is expanding eligibility that is the No. 1 cost driver for Medicaid.

Some Republican governors took the deal because they needed the money and because they have huge chunks of their population that need healthcare services.

Some of those same governors are balking at the Republican plan to relax the federal requirements in exchange for less federal money. They want flexibility but they also want the money promised by Obama.

Unfortunately, the federal government doesn’t have an endless stash of money just waiting to be spent on Medicaid.

The McConnell plan is not in any way perfect, but it is a start in the process of reforming a broken Medicaid system.  A complete overhaul is long past due.

It is possible to fix this system by giving more power to consumers, less power to bureaucrats and by saving the taxpayers hundreds of billions of dollars by weeding out waste, fraud and abuse and by creating a more competitive marketplace. They could do this, for example, by giving everybody on Medicaid a refundable health savings account.

That would be a good result.  Not sure if that will happen by National Asteroid Day, though.

Also published on The Hill.