Tag Archives: Issues & Insights

Medicaid Funding Scam Tolerated For Years

18 Tuesday Mar 2025

Posted by in Medicaid, rent seeking

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It’s been underway in various forms for a long time, at least since the early 1980s. It’s a basic variant of what the National Library of Medicine once called “creative financing” by some states “to get more federal dollars than they otherwise would qualify for” under Medicaid. It was even recognized as a scam by Joe Biden during Barack Obama’s presidency, and more recently by a number of legislators. Perhaps DOGE can do something to bring it under scrutiny, but ending it would probably take legislation.

Here’s the gist of it: increases in state Medicaid reimbursements qualify for a federal match at a rate known as the Federal Medical Assistance Percentage (FMAPs). First, increases in Medicaid reimbursements must be funded at the state level. To do this, states tax Medicaid providers, but then the revenue is kicked back to providers in higher reimbursements. The deluge of matching federal dollars follows, and states are free to use those dollars in their general budgets.

FMAPs vary based on state income level, so states with poorer residents have higher matching rates. The minimum FMAP is 50%, and it ranges up to 90% for marginal reimbursements falling under expanded Medicaid under Obamacare. The dollar value of the federal match is not capped.

The graphic at the top of this post highlights the circularity of this funding scheme. The graphic is taken from the Government Accountability Office’s “Medicaid Managed Care: Rapid Spending Growth In State Directed Payments Needs Enhanced Oversight and Transparency”. Here’s how Issues & Insights puts it:

“Let’s say, for example, a state imposes a provider tax on hospitals that raises $100 million. And then it returns that $100 million to the hospitals in the form of higher Medicaid reimbursement rates. There’s been no increase in benefits. Providers aren’t better off. But the state gets an extra $50 million from the federal government’s matching fund, money that it can use for anything it wants.“

However, whatever the increment to state coffers, and no matter what state programs are funded as a result, the increment is always expressed as a federal contribution to state Medicaid spending. That bit of shading helps cover for the convoluted and pernicious nature of the scheme. The lack of transparency is obvious, cloaking the circular nature of the flow of funds from providers to states and then back to providers. It’s possible that the arrangement inflates total annual Medicaid costs by as $50 – $65 billion a year, or by 6% – 8%.

Of course, this is also a blatant example of bureaucratic waste, and the allocation of “supplemental reimbursements” are a potential seedbed for cronyism and graft.

It would be better for the federal government to simply give states the money under block grants without the rigmarole. But of course that would change the character of the rent seeking already taking place, and the political daylight might not serve beneficiary states and providers well.

Putting aside the deception inherent in the funding mechanism, states vary tremendously in their reliance on federal matching revenue. States with large populations and high average incomes rely more heavily on the circular inflating of Medicaid reimbursements. California and New York lead the way in both Medicaid provider taxes and federal matching funds. Alaska, however, imposes no Medicaid provider taxes, and smaller states like Wyoming collect little in provider taxes.

High income states receive lower FMAPs, which seemingly encourages both higher Medicaid provider taxes and more “generous” provider reimbursements in order to harvest more federal matching funds. In addition, states have an incentive to participate in expanded Medicaid under the Affordable Care Act in order to receive higher matching rates.

The reciprocal nature of state-level Medicaid provider taxes and provider reimbursements implies a substantial but fictitious component of state Medicaid costs. The purpose is to qualify for federal matching dollars under Medicaid. The governments of 49 states have carried on with this escapade for years. Their misguided defenders insist that the federal contribution is necessary to protect benefits that states might otherwise have to cut. But even that stipulation would not justify the pairing of taxes on and reimbursements to Medicaid providers, which inflates the spending base upon which federal reimbursements are calculated. You have to wonder whether federal taxpayers should forgive the overstatement of costs and misallocation of funds.

Effective Immunity Means IF YOU CATCH IT, You Won’t Get Sick

12 Thursday Aug 2021

Posted by in Coronavirus, Uncategorized, Vaccinations

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Listen very carefully: immunity does NOT mean you won’t get COVID, though an infection is less likely. Immunity simply means your immune system will be capable of dealing with an infection successfully. This is true whether the immunity is a product of vaccination or a prior infection. Immunity means you are unlikely to have worse than mild symptoms, and you are very unlikely to be hospitalized. (My disclaimer: I am opposed to vaccine mandates, but vaccination is a good idea if you’ve never been infected.)

I emphasize this because the recent growth in case numbers has prompted all sorts of nonsensical reactions. People say, “See? The vaccines don’t work!” That is a brazenly stupid response to the facts. Even more dimwitted are claims that the vaccines are killing everyone! Yes, there are usually side effects, and the jabs carry a risk of serious complications, but it is minuscule.

Vaccine Efficacy

Right out of the gate, we must recognize that our PCR testing protocol is far too sensitive to viral remnants, so the current surge in cases is probably exaggerated by false positives, as was true last year. Second, if a large share of the population is vaccinated, then vaccinated individuals will almost certainly account for a large share of infected individuals even if they have a lower likelihood of being infected. It’s simple math, as this explanation of base rate bias shows. In fact, according to the article at the link:

“… vaccination confers an eightfold reduction in the risk of getting infected in the first place; a 25-fold reduction in risk of getting hospitalized; and a 25-fold reduction in the risk for death.”

The upshot is that if you are vaccinated, or if you have acquired immunity from previous exposure, or if you have pre-existing immunity from contact with an earlier COVID strain, you can still “catch” the virus AND you can still spread it. Both are less likely, and you don’t have as much to worry about for your own health as those having no immunity.

As for overall vaccine efficacy in preventing death, here are numbers from the UK, courtesy of Phil Kerpen:

The vertical axis is a log scale, so each successive gridline is a fatality rate 100x as large as the one below it. Obviously, as the chart title asserts, the “vaccines have made COVID-19 far less lethal.” Also, at the bottom, see the information on fatality among children under age 18: it is almost zero! This reveals the absurdity of claims that children must be masked for schools to reopen! In any case, masks offer little protection to anyone against a virus that spreads via fine aerosols. Nevertheless, many school officials are pushing unnecessary but politically expedient masking policies

Delta

Ah, but we have the so-called Delta variant, which is now dominant and said to be far more transmissible than earlier variants. Yet the Delta variant is not as dangerous as earlier strains, as this UK report demonstrates. Delta had a case fatality rate among unvaccinated individuals that was at least 40% less than the so-called Alpha variant. This is a typical pattern of virus mutation: the virus becomes less dangerous because it wants to survive, and it can only survive in the long run by NOT killing its hosts! The decline in lethality is roughly demonstrated by Kelly Brown with data on in-hospital fatality rates from Toronto, Canada:

The case numbers in the U.S. have been climbing over the past few weeks, but as epidemiologist Larry Brilliant of WHO said recently, Delta spreads so fast it essentially “runs out of candidates.” In other words, the current surge is likely to end quickly. This article in Issues & Insights shows the more benign nature of recent infections. I think a few of their charts contain biases, but the one below on all-cause mortality by age group is convincing:

The next chart from Our World In Data shows the infection fatality rate continuing its decline in the U.S. The great majority of recent infections have been of the Delta variant, which also was much less virulent in the UK than earlier variants.

Furthermore, it turns out that the vaccines are roughly as effective against Delta and other new variants as against earlier strains. And the newest “scary” variants, Kappa and Lambda, do not appear to be making strong inroads in the U.S. 

Fading Efficacy?

There have been questions about whether the effectiveness of the vaccines is waning, which is behind much of the hand-wringing about booster shots. For example, Israeli health officials are insisting that the effectiveness of vaccines is “fading”, though I’ll be surprised if there isn’t some sort of confounding influence on the data they’ve cited, such as age and co-morbidities. 

Here is a new Mayo Clinic study of so-called “breakthrough” cases in the vaccinated population in Minnesota. It essentially shows that the rate of case diagnosis among the vaccinated rose between February and July of this year (first table below, courtesy of Phil Kerpen). However, the vaccines appear only marginally less effective against hospitalization than in March (second table below).

The bulk of the vaccinated population in the U.S. received their jabs three to six months ago, and according to this report, evidence of antibodies remains strong after seven months. In addition, T-cell immunity may continue for years, as it does for those having acquired immunity from an earlier infection. 

Breakthroughs

It’s common to hear misleading reports of high numbers of “breakthrough” cases. Not only will these cases be less menacing, but the reports often exaggerate their prevalence by taking the numbers out of context. Relative to the size of the vaccinated population, breakthrough cases are about where we’d expect based on the original estimates of vaccine efficacy. This report on Massachusetts breakthrough hospitalizations and deaths confirms that the most vulnerable among the vaxed population are the same as those most vulnerable in the unvaxed population: elderly individuals with comorbidities. But even that subset is at lower risk post-vaccination. It just so happens that the elderly are more likely to have been vaccinated in the first place, which implies that the vaccinated should be over-represented in the case population.

Conclusion

The COVID-19 vaccines do what they are supposed to do: reduce the dangers associated with infection. The vaccines remain very effective in reducing the severity of infection. However, they cannot and were not engineered to prevent infection. They also pose risks, but individuals should be able to rationally assess the tradeoffs without coercion. Poor messaging from public health authorities and the crazy distortions promoted in some circles does nothing to promote public health. Furthermore, there is every reason to believe that the current case surge in Delta infections will be short-lived and have less deadly consequences than earlier variants.

Joe’s “Boom”: Mendacity or Memory Loss?

06 Tuesday Oct 2020

Posted by in economic growth, Executive Authority

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Joe Biden has claimed that he and Barack Obama had left Donald Trump with a “booming” economy to start his term in office. Of course, if he had anything to do with economic performance during the Obama Administration, it may have been his oversight of the mismanaged and ineffective “shovel-ready” stimulus program of 2009, For his sake, one might hope (and suspect) his oversight was nominal. In any case, his characterization of the Obama economy is not really accurate, as this editorial at Issues and Insights demonstrates. I could argue with a few of their points, but the thrust of it is correct. The economy weakened in 2015 and 2016, and expectations were for continued slow growth or possibly a recession in 2017 or after. At that point, many economists thought the aging expansion might be on its last legs. But economic growth exceeded expectations after Trump took office. As for job growth, economists predicted relatively sluggish growth in 2017-2019, but actual job growth exceeded those projections by more than three times.

Finally, Biden’s assertion that “Trump caused the recession” was laughable, especially when the punchline is his willingness to “shut down the economy“! He insists “I would listen to the scientists”, presumably the same knuckleheads who don’t understand the public health tradeoffs between the pandemic itself and lockdown risks (and who don’t understand the Constitution). Biden might not understand that the President lacks constitutional powers to demand a nationwide shutdown. Trump was quite sensibly persuaded to leave non-pharmaceutical interventions in the hands of the private sector as well as state and local governments, with guidance from federal health authorities. That some state and local leaders instituted draconian policies, which were largely ineffective and often damaging. was and is a terrible misfortune. The more sensible approach is to  protect the most vulnerable and allow others to gauge their own risks, as we always have in earlier pandemics.