APRIL 26, 2012

GAO Sounds the Fiscal Alarm on State Medicaid Costs

The U.S. Government Accountability Office has a new report on state and local government finances. Of greatest concern are the expected increases in Medicaid spending and health care for government employees and retirees.

The primary driver of fiscal challenges for the state and local government sector in the long term continues to be the projected growth in health-related costs. Specifically, state and local expenditures on Medicaid and the cost of health care compensation for state and local government employees and retirees are projected to grow more than GDP.

This should be a major concern for Pennsylvania lawmakers and taxpayers, as Medicaid spending has been growing significantly faster than the economy.

Welfare spending, driven by Medicaid, is one of the four alarms that threatens Pennsylvania's economy. As we have written about before, and noted in the GAO report, Medicaid costs will rise even faster under the new federal health care law, PPACA, which increases eligibility and includes a "maintenance of effort" requirement that prohibits states from making significant changes to existing programs.

For more on the fiery threat of rising Medicaid costs, check out our report, Ending the Cycle: Reforming Welfare in Pennsylvania.

posted by NATHAN BENEFIELD | 00:04 PM | 0 comment

APRIL 17, 2012

Why We Are Losing the War on Poverty

Michael Tanner, Director of Health and Welfare Studies at the Cato Institute, published a study that cuts to the heart of the poverty problem in the U.S. Tanner writes that the war on poverty has failed miserably despite the government spending nearly $1 trillion per year (for context our entire national defense budget is $685 billion).

In 1964, when the "War on Poverty" began, about 19 percent of Americans were below the poverty line. Nearly 50 years and $15 trillion later, 15.1 percent of Americans find themselves in poverty, and the rate is climbing. Pennsylvania is in the same boat, with poverty rising over the past ten years, despite a 52 percent increase in welfare spending.

It's safe to say more spending does not equal less poverty. In fact, Tanner argues more spending actually encourages dependency.

The nature of government is such that programs are al­most always implemented in a way to bene­fit those with a vested interest in them rath­er than to actually achieve the programs' stated goals. As economists Dwight Lee and Richard McKenzie among others point out, the political power necessary to transfer in­come to the poor is power that can be used to transfer income to the nonpoor, and the nonpoor are usually better organized po­litically and more capable of using political power to achieve their purposes. . . . Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureau­cracy than with actually fighting poverty.

This spring, the political power of providers and the welfare bureaucracy is on display in Pennsylvania as lawmakers consider relatively small welfare reductions—Gov. Corbett's proposed General Fund budget would reduce welfare spending by a scant 0.3 percent after decades of unsustainable growth.

A few of the welfare reforms include:

• Hospital Application Process Revisions (Savings $10 million): Keeps recipients enrolled through the fee-for-service program until redetermination. Often individuals are added to capitated plans but rarely use care. Instead an individual can apply for continual insurance, placing the responsibility with the person, not the state.
• High Cost Case Reviews (Savings $45 million): Intensive case management for high cost consumers enrolled in Medical Assistance programs that reimburse for services based on utilization and fee schedules.
• Child Care Reimbursement Reform (Savings $10 million): Requires rate reductions for unregulated relative and neighbor care and reduces the number of days of free childcare after a parent loses a job from 30 to 60.

Tanner's argument is that the best way to fight poverty is by reducing government programs that require high taxes and regulatory excess, which inhibit job and wealth creation.

But more important, the concept behind how we fight poverty is wrong. The vast majority of current programs are focused on making poverty more comfortable—giv­ing poor people more food, better shelter, health care, and so forth—rather than giving people the tools that will help them escape poverty.

posted by ELIZABETH STELLE | 00:41 PM | 0 comment

APRIL 13, 2012

Medicaid Flexibility: The Key to a Sustainable Safety Net

As we inch towards the state budget deadline, welfare spending reductions in Pennsylvania continue to be contentious. The reductions that are proposed concentrate on 20 percent of spending, since 80 percent is tied to Medicaid and state officials are barred by the feds from improving the quality or efficiency of the program.

Welfare spending is already outpacing personal income and state revenues; without changes, welfare spending is projected to grow 8 percent per year. How can we ensure sustainable welfare spending without harming those in need? By reforming the program driving the majority of the spending: Medicaid.

There is an effort to give states some control over Medicaid. Legislation recently introduced in the US House of Representatives, HR 4160, would create a Medicaid block grant, allowing states the freedom to design eligibility, benefits and coordinated care around the unique needs of their population. In exchange for this regulatory flexibility, Medicaid funding would be frozen at 2012 levels.

Getting rid of the current matching formula that rewards increases in state spending with additional federal funding (all from taxpayers) will go a long way in refocusing Medicaid benefits.

State Flexibility Act Endorsement Letter

posted by ELIZABETH STELLE | 03:55 PM | 0 comment

APRIL 9, 2012

Medicaid Waivers & the Looming Fiscal Crisis

In the waning days of 2008, the state of Rhode Island secured a global waiver for its Medicaid program. The waiver exempted the state from many federal rules and mandates in exchange for a five year spending cap of $12.1 billion. The architect of the waiver was then-Rhode Island Secretary of Health and Human Services Gary Alexander. He's now heading Pennsylvania's Department of Public Welfare.

A December 2011 study by the Lewin Group found Rhode Island's experiment is lowering spending and improving care. Patients are finding better access to doctors, reducing the need for expensive emergency room use. The savings total more than $55 million—not bad for a small state.

In the Wall Street Journal last week Sec. Alexander said taxpayers across the country could save $200 billion if every state followed Rhode Island's lead.

But unfortunately, the federal government won't allow other states to follow Rhode Island's lead. A cornerstone of President Obama's health care plan is to enroll even more Americans in Medicaid. Medicaid currently costs taxpayers more than $400 billion annually in federal and state spending. The surge in enrollment will force states to spend an estimated $118 billion more over the next decade—creating fiscal crises across the country. State governors recognize the desperate situation and have been asking for a Rhode Island-type alternative for nearly two years.

Congressman Todd Rokita from Indiana has introduced a block grant bill that would mimic Rhode Island's waiver and cap states' Medicaid and SCHIP funding at 2012 levels in exchange for regulatory flexibility. States should rally behind this legislation and continue to press upon the Obama Administration the necessity of state flexibility—it is essential if states want to continue to serve the neediest citizens without raising taxes.

posted by ELIZABETH STELLE | 10:38 AM | 0 comment

APRIL 5, 2012

Welfare Sec. Alexander Discusses Mending the Safety Net on the BOX

On the latest edition of The BOX, Pennsylvania Department of Public Welfare Secretary Gary Alexander takes time to discuss proposed welfare reforms.

Despite accusations of wanting to "throw the poor out on the street," the reality is that in order to be able to support those who truly need assistance, reforms to the welfare system must occur. Secretary of Welfare Gary Alexander explains the Corbett Administration's plan to "mend the safety net," while encouraging individual independence, rather than dependence on the state.

Listen online to the 15 minute podcast and don't forget to subscribe to The BOX in iTunes.

To learn more about welfare reform, read our welfare reform policy points.

posted by ELIZABETH STELLE | 03:40 PM | 0 comment

APRIL 2, 2012

Human Services Programs Must Deal with Wasteful Spending

Last week, you couldn't swing a dead cat in the state capitol without hitting someone protesting Gov. Corbett's welfare spending reductions. The governor proposed combining six human service line items, such as Mental Health Services and Homeless Assistance, into a block grant that gives counties more discretion. In return for flexibility, Gov. Corbett hopes to control rapidly increasing welfare spending by reducing human services appropriations by 20 percent.

Yesterday at a public hearing (Subscription only), families expressed concern about spending cuts and the impact on 15,456 people waiting for services. The only solution they offer is more spending, and they don't care if it means higher taxes and a higher cost-of-living for everyone else.

In Pennsylvania, welfare spending has increased three times faster than the rest of the state budget since FY 2002-03. If we continue down this path, you can rest assured living expenses, thanks to tax increases, will rise. But there is a way to cut the waiting list without increasing taxpayer's heavy burden -- eliminate wasteful spending.

Last fall, Department of Public Welfare Executive Deputy Secretary Tim Costa testified the lack of clear fiscal controls created a large amount of waste and prevented the department from serving more people. The Office of Developmental Programs (ODP), which serves those with intellectual disabilities, saw a budget increase of $664 million, or 60 percent, from FY 2004-05 to FY 2010-11, yet the number of individuals served increased only 27 percent. Costa explained:

All of us want the same thing - to provide quality services for those in need through a sustainable, successful program with clear and fair rules of the road for families and providers to follow. Lack of clear rules carries a real price. With almost 16,000 persons with intellectual disabilities on the waiting list hoping to enroll into the system and get the services they need, the need for reform is urgent.

So what kind of waste is occurring? One example is the policy of paying for empty nursing home beds. If a patient leaves a facility for a hospital stay or other temporary absence for treatment, the federal government will match payments for up to 30 days to reserve the bed. However, state rules allow payment for an empty bed for 48 days, and if the patient leaves for medical treatment, there is no limit to how many days ODP will pay to keep that bed empty. Between these temporary vacancies and permanent vacancies, ODP shouldered $30 million in state costs just in the last fiscal year.

Gov. Corbett's welfare proposals are not about punishing the disabled, but maximizing the number of people that can be served with a sustainable budget.

posted by ELIZABETH STELLE | 02:30 PM | 0 comment

MARCH 26, 2012

Chart of the Day: Welfare Overlap

The Pennsylvania Department of Public Welfare (DPW) encompasses much more than Food Stamps and Medicaid. There are numerous federally-funded and state-only aid programs. In fact, most of the 2.7 million individuals receiving benefits are enrolled in multiple programs, as demonstrated in the chart below (prepared by DPW).

Today, more than one out of every five Pennsylvanians is enrolled in at least one welfare program, yet the state's poverty level continues to rise. It's time to right-size the welfare system, and focus programs on serving the truly needy while encouraging independence.

posted by ELIZABETH STELLE | 01:40 PM | 0 comment

MARCH 5, 2012

Chart of the Day: Welfare Spending

Total welfare spending in Pennsylvania more than tripled from 1991 to 2012, rising 227 percent. During the same period (1991-2011) population rose by a paltry 6.7 percent. It goes without saying that this rate of spending is unsustainable for taxpayers, but it's also bad for the truly needy who become dependent on unaffordable benefits.

For more on welfare spending and the systematic reforms needed to end the cycle of higher poverty, read our report on reforming Pennsylvania welfare spending.

posted by ELIZABETH STELLE | 10:30 AM | 0 comment

FEBRUARY 29, 2012

5 Scary Facts about Pennsylvania's Welfare Spending

Welfare spending in Pennsylvania is out of control. The Department of Public Welfare is now the largest department in the state. It will continue to crowd out education, environmental protection and public safety if the status quo continues.

1. Forty cents of every state tax dollar goes to welfare spending.
   
   
2. Welfare spending grew three times faster than the rest of the state budget since FY 2002-03. Welfare spending is growing faster than overall state spending, Pennsylvania's economy, and poverty.
   
   
3. The number of Pennsylvanians in poverty increased nearly 50 percent in the last decade. The state's poverty rate has been climbing since 2000, regardless of economic conditions.
   
   
4. Welfare spending is projected to grow five times faster than revenue for 2011-14. The Pennsylvania Independent Fiscal Office suggests General Fund revenue growth will average only 1.6 percent annually for 2011-14, while Public Welfare spending is projected to grow 8 percent per year.
   
   
5. In 2001, three Pennsylvanians were working for every individual getting welfare benefits. Today that ratio has dropped to two to one. One out of every five Pennsylvanians is receiving some type of state welfare benefit.

The status quo is not sustainable. It is failing the poor and wages a heavy burden on taxpayers. Principled welfare reforms can reduce spending while protecting benefits for the truly needy and promoting the dignity of work.

posted by ELIZABETH STELLE | 10:48 AM | 0 comment