A Giant Insurance Company With An Army

With Tax Day now behind us, it’s worth looking, again, at where our tax dollars come from and also how our tax dollars are spent.  The Brown Bear helpfully sent me an article reporting on the Taxpayer Receipt prepared by a nonpartisan group called the Committee for a Responsible Federal Budget.  While the original article is behind the Wall Street Journal website paywall, a Fox Business reprint of the article’s text is available on-line.

ss-recipientThe Taxpayer Receipt shows how every $100 in federal taxes was spent in 2016 — and, to give a sense of the trend lines, how that same $100 was spent in 2011, too.  The result supports the conclusion memorably expressed by the line I’ve used as the headline for this piece:  the United States has become a “giant insurance company with an army.”

Why?  Because half of all federal spending goes to Social Security, Medicare, Medicaid, and health programs, and that number is growing, with Social Security spending up 17% since 2011, Medicare up 15.1%, and Medicaid up 25.4%.  Social Security gets by far the biggest piece of the federal spending pie, receiving $23.61 of every $100 in tax dollars.  Medicare places second, with $15.26.

And what about that army?  National defense comes in third, with $15.24 of every $100 in taxes paid.  That amount dropped 22.3% from 2011 to 2016, incidentally.

On the spending side, the lesson from these numbers is clear:  we’ve become an enormous social welfare state, with benefits continuing to expand.  As the percentage increases from 2011 to 2016 indicate, the growing spending on such programs is crowding out our ability to fund other programs, like transportation infrastructure, federal parks, space exploration, and every other federal initiative you can name.  And the increased spending isn’t helping the nagging problem of Social Security solvency, either.  The program is underfunded by at least 20 percent, and under current projections the Social Security Trust Fund (not exactly an accurate moniker) will run out of money in 17 years.

Oh, and here’s another interesting data point — fully $6.25 of every $100 in tax revenue goes to pay interest on the national debt.  That number is growing, too.

On the tax generation side, the individual income tax provided 47% of the $100, with payroll taxes producing 34%, corporate income taxes 9%, and customs duties and excise taxes another 9%.

Now, get back to work!

Uncle Sam, The Scooter Sap

Over the weekend the Washington Post carried a terrific article about how fraudsters ripped off Medicare — and through Medicare, the American taxpayer — in the Great Scooter Scam.  It’s another troubling, cautionary tale that shows how good intentions can run awry, how fraudsters are always ready to pounce, and how our ponderous governmental apparatus is just not well-suited to ferreting out fraud.

The fraud scheme grew out of Medicare’s requirement that claims be paid promptly, and the vast scope of coverage that Medicare supplies.  With millions of claims being received, there was no way to check them out before making the required prompt processing decision.  So Medicare’s default approach was to pay claims first, investigate later.  The fraudsters learned this, and rubbed their hands with glee.  But fraudsters can’t perform surgery or other medical care, so how do they take advantage of that gaping vulnerability in the system?  Medical equipment was the answer . . . but the crooks then had to find just the right kind of equipment, where real money could be made.

Ultimately, they realized that scooters and motorized wheelchairs were perfect.  The need for them was plausible, and there was a huge gap between the actual cost of the devices and the inflated amount Medicare would pay.  The fraudsters created elaborate schemes that included “recruiters” who identified seniors to receive the scooters and bogus medical supply companies — and seniors who willingly participated because they thought there were getting a freebie, even if it was something that they didn’t need.  When Medicare changed the rules to require in-person doctor visits to try to stop the fraud, the crooks recruited doctors who were willing to participate in the fraud in exchange for a cut.

The result?  Perfectly able-bodied seniors with wheelchairs, still in their wrapping, gathering dust in their garages or serving as the perch for oversized teddy bears.  Seniors riffing on the Seinfeld episode and having scooter races in their neighborhoods.  And huge amounts of federal money lining the pockets of criminals.

The scope of the fraud is astonishing.  The Medicare system has paid billions for motorized wheelchairs, and they don’t even know how many of the purchases are legitimate.  One recent audit of paid bills showed that 80 percent were improper.  And even after the federal government became aware of the scooter scam, in 1998, it continued to pay billions in phony claims.  Since 1999, Medicare has paid $8.2 billion for 2.7 million motorized wheelchairs and scooters.  In 2003 alone, $964 million was spend on the devices.  These seem like huge numbers, but they are only a blip in the vast Medicare system — which is part of the reason why it took so long to meaningfully tackle the problem.

The Medicare system now says that it has effectively addressed the scooter scam, and the amounts spent on motorized wheelchairs fell to only $190 million in 2013.  Should we have confidence that all of that money — and all of the billions of dollars shelled out for other forms of medical equipment — is being spent in response to legitimate medical needs?  Not really.  The system is too large, oversight is minimal, and there are too many gaps where the fraudsters can take advantage.  And, perhaps most distressingly, there apparently are lots of “recruiters,” doctors, and seniors who apparently are all too willing to participate in a criminal scam so long as they get something out of it.

The Washington Post article about the Great Scooter Scam should be required reading for every Member of Congress who thinks the best way to solve a problem is to create a governmental program that pays out money to address it.

. . . And Reporters Should Act Like Reporters

One other point about the salutary role of the press in exposing Representative Todd Akin’s ignorant views about rape and women: the press can only fill that role if reporters actually act like reporters.

Unfortunately, the situation that produced Akin’s Waterloo — where one public figure sits down with one reporter to answer questions — happens all too rarely these days.  How often do political figures even appear on shows like Meet The Press?  Rather than a Senator, foreign leader, or some other actual public servant, the guest often is a campaign manager or other unelected individual who is there to voice the talking points of a particular candidate, campaign, or party.  Moreover, much of such shows is devoted to “roundtable discussions” where celebrity journalists who never have done much real reporting express their opinions about the “issues of the day.”  No doubt the producers of those Sunday morning shows think the arguments that ensue make for “better television” than the Meet The Press format of the ’60s, where a panel of three serious, gray-suited reporters respectfully fired questions at that week’s guest.

To illustrate the point, consider the first Meet The Press that aired after Mitt Romney selected Paul Ryan as his running mate.  The two “newsmaker” guests were Wisconsin Governor Scott Walker and Obama campaign guru David Axelrod, followed by a panel of journalists arguing about the impact of “Obamacare” and Ryan’s proposed budget on Medicare.  Does anyone really expect much in the way of “news” (or enlightenment, for that matter) from such a lineup?  Given the focus on Medicare, rather than featuring an ever-present hired gun like Axelrod or a tiresome panel of TV personalities, how about bringing in the chief actuary of the Medicare program, or one of the Medicare trustees, and have knowledgeable reporters who cover Medicare ask them some meaningful questions about the programs, its condition, and the expected impact of the competing proposals?

The important role of the press in our democracy means that the news media must actually be willing to play that role:  as the skeptical, neutral questioner interested in ferreting out the truth, rather than the point-of-view advocate for one position or another.  We can celebrate the role of the press in showing something important and disturbing about Congressman Akin, but we can also regret that the press — due to disinterest, or laziness, or a concern for ratings — doesn’t play that role as often as it should, or could.

Penile Pumps And Public Spending

A story has been rolling around the internet about how, since 2001, Medicare has spent $240 million — i.e., almost a quarter of a billion dollars — on penile pumps for elderly men who are experiencing erectile dysfunction.  The Centers For Medicare and Medicaid Services Local Coverage Determination states that, for Medicare to pay for such a device, the “patient’s medical record must contain sufficient documentation of the patient’s medical condition to substantiate the necessity for the type and quantity of items ordered.”

This is the kind of story that, obviously, can become the subject of jokes and double entendres — but I think the jollity just obscures a deeper, serious question.  When the federal government pays for medical care, what is it supposed to be paying for?

Is it simply paying for whatever care is necessary to keep someone alive?  Is it paying for a level of health necessary to achieve a certain quality of life?  Or, is it obligated to pay for whatever drugs, devices and other forms of treatment that the covered person thinks he or she needs to keep their health as close to 21-year-old perfection as it can possibly be?

If it is the first option, then we are going to spend a lot less — but some governmental agency is going to be making some brutal baseline decisions.  If it is the second option, then bureaucrats are going to be making uncomfortable judgments about what constitutes a “reasonable” quality of life.  And if it is the third option, our debt-ridden nation is going to be spending millions of dollars on things like penile pumps for aging men who think their bedroom performance level should be as close as possible to what it was when they were horny 20-year-olds.

The comical penile pump spending story, therefore, is worth pondering as an example of the kinds of questions that are raised when the federal government becomes a primary payer for health care.  I’m not quite sure where I come out on the three options described above — but I do think it is ludicrous that the federal government has spent nearly $250 million on penile pumps in the last decade.

Thoughts On The President’s Speech

Kish and I watched the President’s speech on health care to the joint session of Congress last night, and I came away with mixed feelings.

As I listened to the first few sentences of the speech, about economic issues, I wondered why the President was speaking about health care at all.  His speech was given about a year after the collapse of the housing market and Lehman Brothers precipitated  a global economic meltdown, exposed extraordinarily risky investment instruments and behaviors, and helped to bring about huge increases in company failures, bank failures, unemployment, and underemployment on a worldwide scale.  A year later, has anything really been done to try to prevent that kind of crisis from occurring again?  The proposals made earlier this year about new regulatory regimes and agencies have fallen by the wayside, as Congress and the President have focused on health care, health care, and health care.  Why is this so?  For every American who is uninsured and urgently concerned about health care, I expect there are many more who are out of work and frantic about feeding their families and losing their homes.

I don’t understand why the President seems almost obsessed with health care, to the point that he has given dozens of speeches about it and is freely spending his political capital on the issue.  After last night’s speech, I still don’t understand it.  One of the major points of the speech was that politicians from Teddy Roosevelt to Ted Kennedy have been talking about health care for decades and have not been successful in achieving comprehensive reforms; President Obama wants to be “the last President” to make that effort.  I am not sure why that argument is a compelling one.  Indeed, it makes it seem as though President Obama is motivatived in significant part by a desire to put a notch on his belt that eluded many of his predecessors.  Given the state of many government programs — including Medicare, which the President himself indicated is riddled with hundreds of billions of dollars in waste, fraud, and abuse — I am not sure that the failure to the federal government to enact sweeping programs in the past has necessarily been a bad thing for the country as a whole.

Some other thoughts:

Republicans looked like idiots by shouting out “lie” or otherwise being disruptive during the President’s speech.  It makes them seem petty, immature, and unpatriotic.  A joint session of Congress to listen to a Presidential address is not a place for unseemly rabble-rousing.

It strains credulity to think that a new government program to insure the many current uninsured Americans can be created and run without massive spending and an increase in the deficit.  Too often, we are promised that savings on waste, fraud, and abuse will finance new governmental initiatives.  It never happens, and we end up with a greater federal debt as a result.  I don’t doubt the President’s sincerity in some of his promises, but I just don’t believe it is achievable to do what he proposes to do without either raising taxes or cutting services or care.  His proposals are so contrary to the average American’s experience they are impossible to accept at face value.

Appeals to cooperation and bipartisanship are fine, but when the speech ends they are quickly exposed as a pipe dream.  Kish and I were watching MSNBC and saw Ohio Senator Sherrod Brown describe the Republican Party as on the leash of the insurance companies.  No doubt there was a Republican talking head on some other network saying the Democrats are the captives of unions and trial lawyers.  So much for bipartisanship!

Speeches to joint sessions of Congress are painful to watch because of the repeated “standing ovations” in response to even the most tepid applause lines or otherwise forgettable phrases.  The phony “interruptions by applause” are irritating and, I think, detract from the dignity of the occasion, making it seem instead like some cheap, choreographed political event.

Why in the world would you wear a bright red pants suit to a Presidential address to a joint session of Congress?

The Power of Demographics

Here’s an analysis of the federal budget and unfunded liabilities that should give everyone pause — particularly those who will be working over the next few decades to fund these currently unfunded liabilities. Last night UJ noted that President Obama has shown a refreshing willingness to tackle big problems. Maybe Social Security and Medicare will be next on his agenda.