Wonkbook: The terrible deal for states rejecting Medicaid

June 4, 2013

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Curious why some hardcore conservative governors, including Jan Brewer of Arizona and Rick Scott of Florida, are fighting with their legislators to accept Obamacare's Medicaid expansion? A new study in the journal Health Affairs article will clear it up.

The study, by the Rand corporation, looks at the 14 states that have said they will opt out of the new Medicaid funds. It finds that the result will be they get $8.4 billion less in federal funding, have to spend an extra $1 billion in uncompensated care, and end up with about 3.6 million fewer insured residents.

So then, the math works out like this: States rejecting the expansion will spend much more, get much, much less, and leave millions of their residents uninsured. That's a lot of self-inflicted pain to make a political point.

It's a truism of health-care politics that the uninsured are impossible to organize. But Obamacare creates an extraordinarily unusual situation. The Affordable Care Act will implemented in states that reject Medicaid. There will be huge mobilization efforts in those states, too, as well as lots of press coverage of the new law. The campaign to tell people making between 133 and 400 percent of poverty that they can get some help buying insurance will catch quite a few people making less than that in its net. And then those people will be told that they would get health insurance entirely for free but for an act of their governor and/or state legislature.

Typically, in politics, there's no guarantee that winning an election will get anything big done. Politicians talk about ending wars and reforming health care, but then they take office, have one meeting with the chairman of the relevant committee, and back off. Here, however, federal law already says Americans making less than 133 percent of poverty are entitled to Medicaid coverage. All that needs to happen is for recalcitrant state governors and legislators to get out of the way.The publicity the benefit will get, the value it has to the target population, and the clear political path to getting that benefit all present an extraordinary organizing opportunity.

In Texas, for instance, 38 percent of the Hispanic population is uninsured. Will having that security so near, and then learning that it's been blocked by their government, activate that voting bloc in the way Prop 187 did in California? It's a possibility National Journal columnist Ron Brownstein raised in a recent article. "In 1994, California Republican Gov. Pete Wilson mobilized his base by promoting Proposition 187, a ballot initiative to deny services to illegal immigrants. He won reelection that year—and then lost the war as Hispanics stampeded from the GOP and helped turn the state lastingly Democratic. Texas Republicans wouldn’t be threatened as quickly, but they may someday judge their impending decision on expanding Medicaid as a similar turning point."

Rick Scott
Florida Governor Rick Scott. J Pat Carter/AP

Wonkbook's Number of the Day: 3.6 million. That's the decrease in the number of American families who reported difficulty paying medical bills during the first six months of 2012 compared to the same period in 2011, according to a new CDC report.

Wonkbook's Quotation of the Day: "During our audit, congressman, we did pose that question and no one would acknowledge who, if anyone, provided that direction," said Inspector General J. Russell George of the decision to subject conservative groups to additional IRS scrutiny in reply to a question from Rep. Tom Graves.

Wonkblog's Graphs of the Day: The most depressing jobs chart in a long time.

Wonkbook's Top 5 Stories: 1) Congress, Werfel work on IRS turnaround; 2) major financial regulation decision comes down; 3) immigration reform's problems; 4) Medicaid is a steal for states; and 5) Obama's three nominees to the D.C. circuit court.

1) Top story: Turning around the IRS

Ways & Means committee to hold IRS hearing today. "The House Ways & Means Committee on Tuesday will hear testimony from six conservative non-profit groups that were targeted by the IRS for their political beliefs, including one anti-abortion rights group that says the IRS tried to limit its protesting of Planned Parenthood...Press reports indicate that her group was asked how often it prays and whether it considers these prayers to be "educational," and that the IRS pressured the group to limit its advocacy against Planned Parenthood." Pete Kasperowicz in The Hill.

Werfel points the way forward for IRS. "Testimony at Monday’s hearing, before a House Appropriations subcommittee, came from the Treasury inspector general, J. Russell George, and new acting IRS commissioner Daniel Werfel, who served as controller of the Office of Management and Budget before taking on his new role with the embattled federal tax-enforcement agency...This time, lawmakers focused on what Werfel would do to help the agency avoid future mistakes and hold those responsible for the targeting campaign accountable." Josh Hicks in The Washington Post.

@JohnJHarwood: Werfel, with the advantage of absolutely clean slate, is much more effective witness for IRS than Shulman or Miller

Nobody knows who ordered the IRS to give conservative groups extra scrutiny. ""Have either of you asked the individuals in Cincinnati who ordered this -- who ordered them to use this extra scrutiny to punish or penalize, postpone or deny? Has that question been asked of any employee?" Graves pressed. "During our audit, congressman, we did pose that question and no one would acknowledge who, if anyone, provided that direction," replied Inspector General J. Russell George. "So no one would acknowledge who gave the directive to do this?" Graves followed up. "That is correct," George replied. "Mr. Werfel, are you satisfied with this response?" Graves continued. "No. We have to get to the bottom of that," said Danny Werfel, the acting commissioner of the IRS, now 12 days into his appointment in the role." Garance Franke-Ruta in The Atlantic.

House cmte. chairman threatens restrictions to IRS funding. "Mr. Rogers said the process would involve providing funding in installments, based on how the IRS answers lawmakers' questions—similar to what was done earlier with agencies such as the Government Accountability Office. Mr. Rogers said the key question was who ordered the targeting of conservative groups, adding that "the power of the purse rests in the Congress—and we're prepared to use that purse."" Siobhan Hughes in The Wall Street Journal.

@thegarance: Mismangement + bonuses="larger issue within the IRS" -- Werfel

Werfel's strategy for IRS wins Republican praise. "He’s only been on the job for 12 days, but Daniel Werfel has a message for Washington: Big changes are coming to the IRS. The man President Barack Obama tapped to fix the scandal-scarred IRS is moving aggressively to restore some measure of credibility there...Werfel pledged to be forthcoming with Congress. That’s key in mending relationships with lawmakers who believe previous leaders misled lawmakers — or outright lied — about the agency’s recently revealed practice of subjecting tea party groups to extra review as they applied for a tax exemption." Lauren French in Politico.

@markknoller: Carney repeated Inspector General's findings of no evidence that outside influence prompted added IRS scrutiny of conservative groups.

Ted Cruz explains why we need the IRS. "[W]hat if some citizen somewhere declines to fill out the postcard? Well, I guess we need some bureaucrat that will send them a follow-up postcard making sure they got the first postcard. If they don’t fill out that postcard, we need someone who will give them a call to make sure they’re getting these postcards...The people doing all this need to sit somewhere. The place they sit doesn’t need to be called “The Internal Revenue Service.” It can be called “The Agency of Tax Freedom.” But it is, in effect, the Internal Revenue Service." Ezra Klein in The Washington Post.

Music recommendations interlude: Parov Stelar, "Silent Shuffle."

Top op-eds

BARRO: Reformists trying to change GOP can already claim one victory. "[T]he topic about which conservative reformists really should be bragging is monetary policy. The most significant reformist conservative idea on the economy is that central banks ought to aggressively boost weak economies with loose monetary policy, and that appropriately loose money can be a substitute for loose fiscal policy. In general, the approach the reformists (including me) endorse is a nominal GDP target, which would have the central bank target a higher inflation rate when growth is lower and vice-versa." Josh Barro in Business Insider.

MILBANK: Accuse first and ask questions later. "A third House committee joined the stampede to examine the IRS on Monday, and its chairman did exactly what you would expect somebody to do before launching a fair and impartial investigation: He went on Fox News Channel and implicated the White House...Not only are they placing the sentence before the verdict, they’re putting the verdict before the trial." Dana Milbank in The Washington Post.

LANE: Godspeed to the 'cadillac tax.' "Far from a threat, however, this is one provision of Obamacare that liberals, conservatives and everyone in between should be able to agree on. It’s simple, fair and — because it fine-tunes market signals to businesses and consumers — likely to further the law’s avowed purposes of expanding coverage while taming costs...Still, the Obamacare excise tax is a second- or third-best solution to the distortions and inequities wrought by the tax exclusion...Whatever you think of Obamacare in general, curbing the tax break for gold-plated health insurance is a genuine achievement." Charles Lane in The Washington Post.

BROOKS: On doing it for the money. "If you choose a profession that doesn’t arouse your everyday passion for the sake of serving instead some abstract faraway good, you might end up as a person who values the far over the near. You might become one of those people who loves humanity in general but not the particular humans immediately around." David Brooks in The New York Times.

PONNURU: The real scandal at the IRS. "Republicans had a better response to the last round of IRS scandals, in the 1990s. In 1997, congressional hearings revealed that IRS agents were being pressured to meet quotas for back taxes and penalties. Agents, sometimes anonymously, admitted that these quotas had led aggressive collectors to squeeze taxpayers for money they didn’t really owe. A bipartisan commission recommended reforms to rein in such practices. The Clinton administration resisted some of the recommendations, but many of them ultimately became law in 1998." Ramesh Ponnuru in Bloomberg.

AMAR AND KATYAL: Why cheek swabs are OK... "Contrary to Justice Scalia’s view, the framers did not answer the DNA question in 1791. Rather, the framers posed the question for us, their posterity. The distinction between criminal evidence-gathering and all sorts of other government programs and purposes is not an all-purpose touchstone or talisman. Rather, we must ponder how intrusive a given search policy is, how discriminatory it might be in application, how well justified and well administered it is, how democratically accountable it is, how it might bear upon human dignity, and so on." Akhil Reed Amar and Neal K. Katyal in The New York Times.

FELDMAN: ...Or why we should worry about the Fourth Amendment. "If DNA sampling was actually like fingerprinting, this argument might be convincing. But of course it isn’t. Fingerprints are a phenotype that reveals nothing except a random pattern that no two individuals share. DNA, however, is your genotype: the blueprint for your entire physical person. If the government has my fingerprints, it’s like they have my randomly assigned Social Security number. If it has my DNA, it’s like they have the entire operating system." Noah Feldman in Bloomberg.

TV interlude: The definitive list, as chosen by the Writers Guild of America, of the best shows.

2) Major fin-reg decision comes down

Financial-stability council identifies non-bank financial companies for additional supervision. "The Financial Stability Oversight Council vote, which took place in a closed session, sets the stage for a major shift in the oversight of a broad swath of big companies that play in financial markets, including private equity firms and hedge funds. Firms designated as “systemically important” will come under the thumb of the Federal Reserve and face a new regulatory paradigm that could change the course of their business...The 10-member council, headed by Treasury Secretary Jack Lew, did not name the firms it determined were systemically important. However, American International Group, GE Capital and Prudential acknowledged that they were among those designated." Danielle Douglas in The Washington Post.

Factory output is weak. "U.S. factories in May posted their worst month since the end of the recession, as weakness overseas overwhelmed a still-shaky manufacturing recovery at home. The Institute for Supply Management on Monday said its broad index, in which any reading below 50 indicates contraction, fell to 49 from 50.7 in April—the first decline since November. The reading, based on a survey of corporate purchasing managers, is the lowest since the recession ended in June 2009." Ben Casselman and Neil Shah in The Wall Street Journal.

Are Fed easing programs supporting inequality? "So if the Fed has been propping up the economy, has it also been propping up inequality? The argument would go something like this: First, many financial experts consider the Fed’s policies a driving force behind the surge in the stock market...A second factor is the rebound in the housing market, aided by the Federal Reserve’s purchase of about $40 billion in mortgage-backed securities every month...But because of tight credit standards, that windfall has mostly gone to the rich – families that meet the standards to refinance, and investors with enough cash to buy. Looking at those two factors, there’s a strong argument that the Fed stands behind growth in inequality, particularly when it comes to wealth." Annie Lowrey in The New York Times.

Explainers: The most depressing jobs chart in a long time, and 8 more takeaways from the International Labor Organization report on global employmentBrad Plumer in The Washington Post, Annie Lowrey in The New York Times.

NYC in the WSJ's funhouse mirror interlude: Dorothy Rabinowitz calls the city's new bike-sharing program "totalitarian."

3) Immigration reform's problems 

E-Verify is supposed to stop undocumented employment, but it could also harm legal workers. "E-Verify has been operating as a pilot project for more than a decade, giving policymakers a preview of how a national system might function. But figuring out how many workers have been wrongly rejected by the system is tricky. A study using 2009 data found that 0.3 percent of applicants suffered initial rejections that were subsequently corrected, allowing the employee to work. But another 2.3 percent of workers got rejections that were never reversed." Timothy B. Lee in The Washington Post.

Does it all hang on border security? "The Gang of Eight’s hopes for a Senate supermajority is running into the GOP’s push for a dramatic crackdown on border security — testing the limits of the bipartisan coalition that’s propelling the bill through Congress. With Congress back this week to work on the measure, Senate negotiators want to pick up as many as two dozen Republican votes in a show of force that compels the House to act. But the result has to be much stricter than the current version of the bill to give it any hope of passing there either. They’ve got to do it without alienating the vast majority of Senate Democrats who like the bill as it is." Carrie Budoff Brown and Seung Min Kim in Politico.

Immigration reform's back-tax dilemma. "When the bill hits the Senate floor in the coming weeks, they’ll have to decide how badly they want to go after back taxes from undocumented workers applying for legal status...The immigration legislation currently moving through the Senate includes a scaled-back provision that relies almost entirely on immigrants coming forward to the Internal Revenue Service voluntarily." Rachael Bade in Politico.

Flowery interlude: The history of the tulip, in video form.

4) Medicaid a great deal for states

Study: Medicaid expansion is a good deal for states. "States would save money by accepting the Medicaid expansion in President Obama's healthcare law, according to a new study. The research, published in the journal Health Affairs, said states that reject the Medicaid expansion will end up paying more for healthcare coverage than states that participate — and covering far fewer people. Together, 14 states that have rejected the expansion will spend $1 billion more on uncompensated care than they would under the expansion, and they'll lose out on $8.4 billion in federal payments, researchers from the Rand Corporation said." Sam Baker in The Hill.

How Sen. Frank Lautenberg changed public health in America. "Lautenberg has had an enormous impact on public health policy in the United States during his 29 years in the Senate. He’s responsible for the smoking ban on airplanes, the minimum drinking age, and the current laws against drunk driving. Just for starters" Brad Plumer in The Washington Post.

6 ways that Obamacare changes insurance premiums. "No more raising prices or refusing to offer insurance to sick people; Less price discrimination allowed against old people; More regulation of what counts as “insurance”; About $950 billion in subsidies to lower-income participants over the first 10 years; More direct and transparent competition between insurers; An individual mandate that pushes the uninsured-by-choice to purchase insurance or pay a penalty." Ezra Klein in The Washington Post.

Can data drive health care policy? "Sebelius highlighted broader use of healthcare data as the annual "Datapalooza" conference kicked off in Washington...Sebelius cited progress encouraging doctors to use electronic health records, as well as efforts in President Obama's healthcare law to foster a more coordinated approach to providing healthcare services. She also noted that the health department recently released reams of data about the differences in what hospitals charge for surgeries and other procedures." Sam Baker in The Hill.

Hospital chains just keep getting bigger. "The American Hospital Association brought [Jerry Morasko, president of Avita Health Systems] to Washington on Monday morning to talk a small group of journalists about hospital mergers. As health policy experts have increasingly worried about a wave of hospital consolidation, the hospitals’ trade association wanted to make the case that growing integration of hospital practices is a positive trend – one with the potential to drive prices down, rather than up" Sarah Kliff in The Washington Post.

House approves bill creating nationwide pharmaceutical traceability. "The House on Monday passed legislation — over some Democratic objections — that would set up a nationwide system aimed at making it easier to trace pharmaceuticals from the manufacturer to the pharmacy, which would help officials fight the spread of counterfeit drugs. Members approved the Safeguarding America's Pharmaceuticals Act, H.R. 1919, in a voice vote after a debate in which some Democrats said the bill is not as good as they would like." Pete Kasperowicz in The Hill.

Participate interlude: What is America’s energy future? Share your view at our first CrowdSourced discussion.

5) Who Obama is nominating to the D.C. circuit

Obama names nominees to federal appeals court. "President Obama will nominate two female lawyers and an African American federal judge Tuesday to serve on the U.S. Court of Appeals for the District of Columbia Circuit, part of an effort to help reshape the federal judiciary before he leaves office. The president will nominate veteran appellate lawyer Patricia A. Millett; Georgetown University Law Center professor Cornelia T. L. Pillard; and Robert L. Wilkins, a judge on the U.S. District Court for the District of Columbia." Juliet Eilperin in The Washington Post.

FAQ: Everything you need to know about the nominations showdown. Dylan Matthews in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

If you pay them money, partisans will tell you the truthDylan Matthews.

A second look at Social Security's racist originsBrad Plumer.

What is America's energy future? Enter a CrowdSourced discussion. Wonkblog.

The most depressing jobs chart in a long timeBrad Plumer.

Everything you need to know about the nominations showdown, in one FAQDylan Matthews.

E-verify is supposed to stop undocumented employment. It could also harm legal workersTimothy B. Lee.

Ted Cruz unintentionally explains why we need the IRSEzra Klein.

How Frank Lautenberg changed public health in AmericaBrad Plumer.

Hospital chains keep getting biggerSarah Kliff.

The six ways Obamacare changes insurance premiumsEzra Klein.

Et Cetera

Your Tuesday morning longread: How the House Republicans have broken into factionsPaul Kane in The Washington Post.

The share of senators who are military veterans has declined dramaticallyMicah Cohen in The New York Times.

White House threatens veto of spending plans unless broader budget deal reachedLori Montgomery in The Washington Post.

How the Republicans lost young AmericaKatie Glueck in Politico.

Illinois gets a downgradeThe Associated Press.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

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