 Okay, so I just want to have a conversation today. I spent four and a half years working on the Hill three and a half years at the House Oversight Committee where I led the committee's oversight of health care programs and entitlement programs and where we did a lot of work on Medicaid. And what we were looking at mostly was the techniques that states use to inappropriately pass costs off on the federal government and how the federal government doesn't really do an effective job of doing oversight of state Medicaid programs. There's a lot of problems with Medicaid and it is the fastest growing program at the federal and state levels. So interrupt me, ask questions, whatever is on your mind. Two main points on Medicaid. The first point is that Medicaid doesn't serve taxpayers or enrollees particularly well and needs fundamental reform and if you're not convinced of that, I hope when you walk out of here today you are convinced of that. The second and something that I spend a lot of time thinking about and working on is that the financing structure leads states to figure out ways to bring loads of federal tax dollars into their state with relatively little incentive for how well that money is spent. Okay, one of the key things, I'm going to go through a couple main sort of basic things to know about Medicaid. Some of you may know all this, some of you may know some of this, I'm sure some of you know some of this. First thing to realize is that there's an uncapped federal reimbursement of state Medicaid spending. Okay, before the Affordable Care Act is afforded for traditional Medicaid populations and traditional Medicaid populations are lower income children and generally their mothers, pregnant women, disabled, so if you're on supplemental security income SSI, you qualify for Medicaid, and also lower income seniors, you can be what's called dual eligible, so you're on Medicaid and Medicare. The reimbursement percentage is based on state per capita income, so the wealthiest states receive a 50% reimbursement. The poorest states typically receive about a 75% reimbursement. On average, if you look back from sort of when Medicaid started in 1965 through 2013 before the ACA Medicaid expansion, the national average was about 57%. Some years that went up during times of economic recession, Congress often found that one way to get aid to states was by increasing the Medicaid reimbursement, so most recently that happened in the stimulus that passed in 2009 that significantly increased the Medicaid reimbursement for states and that was one of the ways the federal government tried to get more money to states who were suffering obviously from the recession. The ACA added a new mandatory population, right, everyone below 133% of the federal poverty level. As was mentioned in the previous panel in 2012, the Supreme Court in a 7-2 decision said that was, Congress didn't have the authority to make that Medicaid expansion mandatory. John Robertson's decision said that's like holding a loaded gun to the state's head because they were threatening to take away all state Medicaid funding for states that didn't expand, so they made that an optional population. But there was a large incentive for states to expand Medicaid in the ACA. From 2014 to 2016, the federal reimbursement rate was 100% for the expansion population. It starts in 2017 to gradually decline. In 2020, it is 90%, and that's the rate that it stays at indefinitely. Medicaid has mandatory versus optional benefits. I listed some of those there. Many states expand their Medicaid programs to cover more than the mandatory benefits. This slide, which is too small a font, unfortunately, shows Medicaid spending by enrollment group. So here are the percentage of enrollees. You can see 48%, I'll read the numbers out, 48% of enrollees in 2013, so this is before the expansion in the ACA were children, 25% were non-disabled, non-elderly adults, 17% people with disabilities, and 9% people who are over the age of 65. And you can see, so Obamacare, what the ACA did, I'll use ACA and Obamacare back and forth, was expand generally this area, so this is going to be much larger now if these numbers were updated for fiscal year 2015. Even though children were about 50% of enrollment, it's relatively small piece of total expenditures. Children are relatively cheap to cover, just 20% of total expenditures, non-disabled adults, also pre-ACA, a relatively cheap population to cover, 16% of total Medicaid expenditures. Here are the sort of two big pieces, the aged and the disabled, total about two-thirds of Medicaid expenditures. The Medicaid program is growing rapidly. These figures here show inflation adjusted amounts. This is, when you see the 1970 here, this is what the equivalent dollars would be in 2015. So the graph is not spaced perfectly here. So you see 1970 to 2000, there's a pretty big jump. And then if you start in 2000, we're tracing every year this area right here, this spike is going to be the Medicaid expansion and you see it just continues its upward trend. CBO in January released their numbers, estimated numbers for 2015 and they have the federal spending at $350 billion. And they said that the federal government now, remember the historic average was 57%. In 2015, federal share was 63%, which is a huge increase. It may seem like only a 6% increase, but when you think about the magnitude of the dollars, it's a huge increase. So we've about $350 billion in federal Medicaid expenditures, about $555 billion total in 2015 when you include the state share. Enrollment is largely driving the increase in expenditures. So this shows enrollment from 1965 through 2015. Again, you see, one of the interesting things is from 1975 through 1990 enrollment was relatively flat. But starting in 1990, we have had lots of state Medicaid expansions prior to the ACA. States have just expanded Medicaid eligibility and then you have this most recent spike here with the Affordable Care Act population. Another really interesting story with Medicaid is that states programs are very different and states spend a lot, dramatically different amounts on enrollees. So what I did was, and this data comes from Kaiser, and I think it is 2011, 2012, or 2013 data. And what I did was show the top two states in spending per enrollee among the four categories and the bottom two states. So you can see average Medicaid spending per aged enrollee. Wyoming and North Dakota are both over $30,000. And Illinois and North Carolina are just over $10,000. So a 3 to 1 ratio between the highest spending states and the lowest spending states for aged enrollees. Disabled enrollees. New York and Connecticut, both over $30,000 per disabled enrollee. Georgia and Alabama, just over $10,000. So again, a 3 to 1 ratio. Average spending per adult enrollee. New Mexico and Montana, both above $6,500. Maine and Iowa at the bottom, just above $2,000. Again, a 3 to 1 ratio. Yes, non-disabled adults, yes. And then children enrollees. Vermont and Alaska at the top of the list. Florida and Wisconsin at the bottom. And again, you see more than a 3 to 1 ratio. Right, so the differences are dramatic. One of the reasons for the federal financing to work the way it did was so these differences wouldn't be as dramatic. The theory behind giving poorer states a higher reimbursement is that that state tax base is going to be less able to finance Medicaid expenditures. Then a wealthier state like New York or Connecticut. They're very wealthy states. So the federal government's going to send money from New York and Connecticut to poorer states like Georgia and Alabama to help those states spend more. And one of the things that we're seeing is that that hasn't worked very well. These wealthier states are, instead of the transfer going this way, these wealthy states spend so much. So look at New York. They're getting 50% of their spending reimbursed by federal taxpayers. So federal taxpayers are spending half of $34,000. So $17,000 goes from the federal government to New York for each disabled enrollee. Alabama has a 70% reimbursement rate. So Alabama is receiving $7,000 per disabled enrollee. So $17,000 going to New York per disabled enrollee, $7,000 to Alabama. So the federal share of these expenditures is also much different and hasn't worked out in the way that when they came up with the FMAP formula that it was designed to work. Yes, sir? I think the reason is because these states have a wealthier state tax base and they have just been able to spend more. So even though they receive a lower reimbursement percentage because they're spending so much more from their own state tax base, they are receiving more in federal contributions even though they have a lower reimbursement percentage. Does that answer your question? That's a good question. And the answer is probably generally no, but certainly something that needs to be studied. Whether this leads to better outcomes. Now you would think it does lead to probably nicer nursing homes in Wyoming and North Dakota than in Illinois and North Carolina. I would expect that because these are largely, I mean spending per agent enrollees for Medicaid is largely going into nursing homes. And that's something I should mention is that Medicaid covers an enormous amount of long-term care expenditures in the U.S. So about 70% of long-term care expenditures are paid through either Medicaid or Medicare. Medicare will pay for the first 100 days in a skilled nursing facility right in nursing home, but after that Medicaid picks up the responsibility for reimbursing. So I think it's between 40 and 50% of long-term care expenditures are financed in the U.S. through Medicaid. Okay, this slide is next three slides. I created late last night to sort of walk you through the financing here. So they're not in probably in Mercatus format. So the graphic arts people in Mercatus will be very mad at me, but oh well. Consider a state with a 60% federal match rate, right? That's the typical scenario. If a state spends a dollar of its own funds, it gets $1.50 from the federal government. Why? Because 60% of $2.50 is $1.50. One of my dissertation advisors, I put this in my dissertation and I needed to explain this to him because he thought that a 60% match rate, they're not going to get $1.50. But they actually do. It actually looks like they're getting 50% more from the federal government and they are. But that's because the percentage is on the total. So a state spends a dollar of its own funds, they get $1.50 from the federal government. Now think about it the other way. A state is having budget problems. And they're trying to figure out where are we going to trim spending. In order for the state to save a dollar, they need to cut their Medicaid program by $2.50. So when states are making decisions about what to cut, are we going to cut from Medicaid, education, transportation, corrections, infrastructure. The way that the federal financing works makes it very difficult for them to cut from the Medicaid program. Because they're taking an additional $1.50 out for each dollar that they cut from the state. So the conclusion is, just with the way this formula works, is the open-ended reimbursement makes it very easy to grow Medicaid. See, and if someone had checked that I would have not put a bad word in there. Makes it very easy to grow Medicaid and very difficult to cut it. Okay, this slide is what I put together to show state expenditure growth from 1990 through 2015. So it includes, and the 1990 values are adjusted for the increase in the consumer price index. So basically, it's almost a 2 to 1 ratio. Not quite where things are, on average, two times more expensive than they were in 1990. Okay, states spent, and this is not $1.8 million. These would be in the trillion. So states spent $1.88 trillion in 2015. Okay, of that, $362 billion on elementary and secondary education, $193 billion on higher ed, $512 billion on Medicaid, $143 billion on transportation, and $661 billion on other stuff. This, by the way, includes federal funds that the state receives. So it's what states spend from their own tax base, as well as what they get in terms of federal funding. Has a percentage of state expenditures in 2015. Medicaid is by far the biggest, 27.4%. The second biggest is elementary and secondary education at 19.3%, higher ed, 10.3%, transportation, 7.7%, and other, 35.3%. And we can send you this PowerPoint, so you don't need to jot this stuff down. In 1990, again, same-dollar values, okay, states spent $900 billion of that. So in 1990, they were spending significantly more in elementary and secondary education than they were on Medicaid. Okay, $205 billion on elementary and secondary education, which was about 23% of state spending, higher ed, $109 billion, which was 12.2%. Medicaid was $112 billion, 12.5%, and you can see the values for transportation and other. Okay, what this last row represents is the increase from 1990 to 2015. So basically, it's just dividing this number by this number and subtracting one. So it's showing you the percent increase. So overall, state expenditures have increased a lot, right? They've more than doubled. They've gone up 108%. What's driving that? Medicaid. Medicaid expenditures have grown 357%. Again, in inflation-adjusted terms, 357% between 1990 and 2015. All the other increases are much smaller. I think it's primarily due to states' increasing enrollment. So part of it is going to be higher healthcare prices and healthcare inflation growing higher than these things. Medicaid higher education has had a lot of inflation since 1990, right? So these things are also susceptible to large price increases. Most of it is just much larger state Medicaid programs, right? Many more enrollees. So I guess what we can see, if we go back to this slide, here is Medicaid enrollment in 1990, right? Probably, it looks like probably just under $30 million, and in 2015, worth $70 million, right? So Medicaid enrollment more than doubled between 1990 and 2015. But I mean, at the same time, it's like, well, the population is growing as well. So that's like, do we have a per capita graph? We do not have a per capita graph. That would have been a good graph to have. It has a percentage of the population. Medicaid now is, so 70 million divided by 315. So it's over 20%. I would say back in 1990, it was probably about 13% of the population. So probably about a 70% increase. Good question. This looks identical to this previous slide, but this just shows federal funding for states. And the point of this is just to show you how much federal funding has increased over time with Medicaid relative to federal funding for the other aspects of state budgets. So in 2015, Washington sent close to $600 billion to states. Of the $586 billion that Washington sent to states, 317 billion of it was through Medicaid. So 54%, more than half of all the money that we send to states goes through Medicaid. You can see the percentages here. 9.2% of what Washington sends to states is on elementary and secondary education. 3.6% for higher ed. 7.2% for transportation. Okay, if you look at in 1990, Washington was still the category of one, I think one observation here is we send a lot more money. And again, these are inflation adjusted dollars. We send about three times as much money to states as we did in 1990. Okay, on Medicaid, we are sending a really, I mean, the difference is dramatic, right? 64 billion to 317 billion. So we're sending more than $250 billion to states through Medicaid than we did 25 years ago. Okay, it's a 400% increase. Other areas of spending have grown, right? Particularly look at higher education is up over 200%, but still they are dwarfed compared to what's gone on with federal funding for Medicaid. Okay, second thing, and this was talked, touched on in the previous, previous panel, the research on the value of Medicaid. So this is Trevor's hand, Trevor's in the back. He's our hand model at Mercatus. We were, we have very smart people at Mercatus. And when I was giving a talk two or three weeks ago and was practicing the talk, I went, talking about this new study by these economists, and these are economists at MIT, Harvard, and Dartmouth, right? And this is the study, the value of Medicaid interpreting results from the Oregon Health Insurance Experiment. It's like, we have to talk about this study, right? This study is really important. They estimated the value of Medicaid recipients, and it's only 20 to 40 cents on the dollar that Medicaid recipients receive. And one of our communications experts was like, you need a visual with that. You need two dimes in a hand. So Trevor went and scoured the internet to find a picture of a hand with two dimes. And surprisingly, there are no pictures on the internet of a hand holding two dimes. So Trevor took a picture of his hand with two dimes in it, and that is the visual that Mercatus brings out to show the value of Medicaid, right? 20 cents on the dollar. The Oregon Medicaid experiment, and I think Megan listed some of the results from the Oregon Medicaid experiment, it's not a perfect experiment for one, right? Because a lot of people who won the lottery did not take steps to enroll. So there was a limited number of spots, people won the lottery and were able to get Medicaid, or lost the lottery and weren't able to get Medicaid. And I mean, one of the things is when it was 40% of people who won the lottery didn't enroll. So that shows you one thing, and that gives you sort of one data point on the value that people place on Medicaid, of the people that did win the lottery and enroll, right? They found that they were much more likely to use healthcare services, right, including both preventative services and ERs. The big finding was no statistically significant effect. They looked at three measures, blood pressure, cholesterol, and blood sugar. Three things that you would expect if you're getting regular medical care, right? You would see a reduction in these three things. No effect, no statistically significant effect on any of those outcomes, and the Medicaid did not reduce the risk of a heart problem. There were two benefits to, so no physical health benefits to Medicaid when you compared the Medicaid population with the control group that didn't receive Medicaid. Okay, it did reduce the rates of depression, I think by 30%, and people felt like better off financially that they weren't worrying about having medical expenses. A lot has been written about Medicaid's quality of care. Yes? It's a good question. The lottery was in 2008, and this study came out in 2013. So I would think at most four. Medu-reval. You know, you're looking at three health conditions that are complicated and have to take a little longer to find, but a discrete, more easy-to-measure instance. So you're asking two questions there. The first, they're very good questions. What you'd want to do is to study at different points in time, right? And follow these people over a short period of time, and then also follow them over a longer period of time. The problem with looking at a longer period of time is that people change coverage, right? And over time, a lot more other explanatory factors can come in. And also in 2014, I mean, you can't really go past 2014 because in 2014, you have the ACA Medicaid expansion. So there are some... Thank you. I'm not taking the experiment. I'm reporting what the findings of the experiment are. So it is very hard to determine on a causal basis, right? If you give someone Medicaid, do they have better health outcomes? Because there are lots of other factors that affect people's health status, whether they have Medicaid or not, right? Whether your age... Yeah, I mean, so Medicaid studies that try to assess factors responsible for health outcomes are fraught with problems, right? One of the reasons that economists really like the idea of the Oregon experiment is because you have random assignment. So the lottery enabled for not a perfect... It wasn't a perfect experiment, right? But it now enabled some sort of control for these unobservable characteristics. All of these... Like most of these studies, and I'm about to get into this now, that people with Medicaid generally have worse outcomes from health care treatments than people with private insurance. Well, people with Medicaid are different from people with private insurance in some ways you can control for. For income, you can control for age, right? You can control for gender. You can control for whether someone's a smoker. But there's a lot of other factors that you can't control for. So you should always take these... They should always be somewhat skeptical on any of these studies that show health benefits or that don't show health benefits. The best study, right, was what I mentioned earlier, the RAND health experiment that had random assignment and followed people for a period of time. What they did was group individuals in four classes based on cost sharing. And the first finding is, yeah, people who had more generous insurance used a lot more health care, right? But then the second finding, they looked at hundreds of metrics. And Megan mentioned they only found two with a statistically significant outcome. In these states, you see throughout a lot of the good health, you see the NZQA previous measures for Medicaid managed care plans as well as CMSs, so I was wondering... So I don't know that I'm not trying to do the study better than I do, but I would guess that those three disease states are simply kind of the same or the important measure to work for proxies and mental health. Yeah, I think that's right. Okay, so good. So now we've gone through the first bullet there in much more detail than I was going to talk about. So that's very good. Thank you for that question. The other question you asked was on cost. And what we've seen with Medicaid expansion generally is because in many states, and this is very state-specific, right, because some states pay Medicaid providers better than other states, but in many states, Medicaid royalties have more limited access to a regular source of care and are more often to use expensive places like emergency rooms. There was a 2011 article in The New York Times where Robert Pair went to Louisiana and found that people in Louisiana were having a very hard time accessing a usual source of care and they would have a Medicaid card, right, but very few people would, very few providers would accept those cards. And in fact, what we're seeing is that Medicaid recipients are increasingly served by a subset of providers, right, and it's also a subset of providers that may be lower quality providers, right, and they don't have the same standard of care as sort of other providers who see only private pay, you know, private pay people do. Let's skip that slide. Okay, I spent three and a half years doing oversight work. On the oversight committee, on Medicaid. This was a lesson I learned before I joined the committee when I was a health policy analyst at the Heritage Foundation. I did a study of New York's long-term care Medicaid complex and we drove around the state of New York talking to providers, talking to interest groups, talking to Medicaid eligibility workers, and I learned that in New York, Medicaid is a verb. Like, what, how is Medicaid a verb? I'm like, yeah, Medicaid it. What does that mean? That means if you see a service that you think can reasonably be categorized as a Medicaid service and get the federal government to reimburse you for that service, you Medicaid it, you bring it, you have Medicaid pay for it, and then you build the federal government and the federal government sends you 50% of whatever the cost of that service is. Okay, all states, it's not just New York. New York sort of is very, they've developed a very elaborate scams and I'll talk more about New York in a little bit, but all states do this, right? 49 states have Medicaid provider taxes, right? They all have an incentive, like I said before, to minimize what the state's share of Medicaid expenditures is, try to make it look like they're actually making expenditures so that those expenditures are reimbursed by the federal government. This is our scenario where we show how provider taxes work. So in a world without provider taxes, right, a state is spending $100 on a provider. The provider is better off by $100. The state sends that bill to the federal government, right? The federal government's like, all right, state, you have a 60% reimbursement rate. We're going to cut you a check for $60. The federal government sends $60 to the state, right? So that the state's really share of that expenditure is only $40. The federal share is $60. Okay, the first thing to realize with provider taxes is that they shift costs to the federal government. So, I mean, one of the really interesting things on provider taxes is how often do you get groups that come to government and say, please tax me, right? It's very rare. So you should think, oh, there's an interesting story behind some, behind phenomena like that. Okay, so what the provider does is works with the state, figures out, all right, state, I'm going to assess $100 tax on you. Okay, the state assesses $100 tax, and the state pays the provider $200, right? They pay them back the $100 in taxes and they pay them the $100 that they originally paid the provider. So the provider is just as well off. The state, then, the federal government comes in and they look at the $200 expenditure. Okay, because that's what the state paid the provider. And the federal government, then, instead of paying the $60, reimburses the state $120. So now the state's collected $120 from the federal government. It has collected $100 from the provider. It's paid the provider $200. You do the math. The state is actually benefiting by $20. And if you look at from the no provider tax scenario, they're actually, the state is better off by $60. Okay, who's worse off by $60? Federal taxpayers. Okay, now, that is assuming the provider taxes just shift the cost from states to the federal government. They certainly do shift the cost from the states from the federal government, but they also increase overall Medicaid expenditures, right? They increase overall Medicaid expenditures because they make the state share of spending less significant, right? And when the state share of spending is lower, right, states have an incentive to spend more on Medicaid than they would otherwise. Yeah? The federal government would be paying to the state if we didn't have the waiver. So don't they have to somehow justify these things? Or are they able to just tap into an unlimited source of reimbursement? So there's two questions. Let me break that up into two pieces. One, there's lots of rules on provider taxes, okay? So the provider taxes are supposed to be broad-based and uniform, which means if you have all the hospitals in the state, you can't just assess the tax on the hospitals that only serve Medicaid beneficiaries and then make those payments back to those hospitals, right? You have to assess the tax broadly on that entire class of hospitals in that... in the entire set of providers in that class, okay? And obviously some hospitals aren't going to like the tax, right? Hospitals that have a lower number of Medicaid enrollees are not going to receive the higher payment rates back through the provider tax mechanism. Now, states can receive waivers from those requirements. Okay, there's also a limit on how much the provider tax can be as a percentage of revenue. So states can't raise... providers can't... states can't raise more than 6% of what their payments are to providers. And if you look at all states, basically states are mostly maxed out. They make as much in provider taxes as they can. But there's waivers, right? So states are allowed to apply to the secretary of HHS for waivers around the uniform and broad-based requirements. And states apply for them all the time, right? And states also make supplemental payments. If you're looking at Medicaid, there's two types of ways providers get money through Medicaid. They get money through regular payment rates, right? And they also get money through supplemental payments. And supplemental payments are growing. And supplemental payments, there's actually very little federal oversight. The oversight of supplemental payments is very weak. GAO has written about this a ton. And it's those supplemental payments that the states can then deliver to individual providers. When I was working at the oversight committee in 2014, we asked GAO to do some... well, we asked GAO to do work on this in 2012. And GAO takes 18 months to do everything. So in the summer of 2014, they came back with us. They looked at three states. They looked at Illinois, California, and New York. California doesn't have data on supplemental payments that they could provide just to GAO. So basically, California told the federal government, we have no idea... we cannot tell you where this Medicaid money is going. We can't match up Medicaid payments on an individual provider basis, right? That raises lots of questions. Illinois and New York did provide this data. There were two hospitals in New York that received in one year close to half a billion dollars, a billion in supplemental payments, even though their Medicaid costs were estimated by GAO at at most $100 million. Those were... actually, I have those on the slide in a little bit. You also asked about waivers. And waivers... so the waivers that I'm talking about are different from sort of the 1115 waivers. So a lot of states have 1115 waivers that allow them to waive Medicaid requirements and receive federal reimbursements. And those are supposed to be budget-neutral. They are often not budget-neutral. I'll give you an example of a state that's not budget-neutral. And that's another concern that GAO has raised on these 1115 waivers, is that they're often not budget-neutral. So the third scenario shows what happens when provider taxes increase the payments that the state makes to providers. The economics says that this is going to increase payment rates to providers. Providers are lobbying for these taxes. They're lobbying for them because they know they're getting higher payment rates. So here we assumed, alright, let's say the state raises the provider rates by 50%. So the state is sending $250 to the provider. The federal government sees that $250 expenditure reimburses 60% of it. They're bursting $150. The state received $100 taxes, received $150 from the federal reimbursement, paid out $250. So they have a wash, right? So they're not spending anything from their state tax base. And if you compare scenario one and scenario three, it makes it pretty clear that states are better off from provider taxes. Providers are better off from provider taxes. The federal government is worse off. And there is a reason that all states but Alaska have provider taxes. And Alaska is, I hired a law firm to or saw an accounting firm to figure out how to institute a provider tax next year. Okay, lesson number two for Medicaid oversight work. Medicaid long-term care is available to just about everyone. So Medicaid long-term care has, there are supposed to be asset requirements on Medicaid long-term care, but there are a huge number of exempt assets. You can have a house worth up to $750,000 and still qualify for Medicaid. Your house is an exempt asset. You can have an unlimited amount of money for a federal retirement account and still qualify for Medicaid. I didn't realize the extent of this problem until I went and we did a trip in Suffolk County, which is Long Island, and we talked to this woman, Janice Eulau, an assistant administrator of Medicaid Services, and she told us it's typical that people come in here owning a house in Long Island. So they're owning a house worth half a million dollars. They have significant money in their retirement accounts for qualifying for Medicaid. And Medicaid is paying for their long-term care services, either delivered at home or in the nursing home. We had a hearing so Congressman Gowdy was our subcommittee chairman and in September 2011 we had a hearing and Janice Eulau testified and this is part of her testimony. So as a long-time employee of the local Medicaid office, I have had the opportunity to witness the diversion of applicants' significant resources in order to obtain Medicaid coverage. It is not at all unusual to encounter individuals and couples with resources beyond exempt resources. So that's the exempt resources would be the house, the IRA, exceeding half a million dollars, some with over a million dollars. There is no attempt to hide that this money exists. There is no need. There are various legal means to prevent those funds from being used to pay for the applicant's nursing home care. Wealthy applicants for Medicaid's nursing home coverage consider that benefit to be their right regardless of their ability to pay for themselves. If you want to get a whole bunch of fun things to read on the internet Google Medicaid estate planning. It's a huge industry and they basically that's what they advertise that they can save you from spending down to qualify for Medicaid. Lesson number three from the Medicaid oversight work that I did on the Hill. The rules are really complicated and CMS doesn't really know what states are doing. For examples, number one New York developmental centers in 2010 a small newspaper in New York the Poughkeepsie Journal anyone ever heard of the Poughkeepsie Journal? I had not heard of the Poughkeepsie Journal. Poughkeepsie Journal wrote an article about facilities in the state of New York that are called developmental centers. They were housing and treating people with developmental disabilities. The daily Medicaid payment rate for those individuals. Anyone want to guess? How much? 100. Anyone else want to guess? We're getting closer. $5,000 daily payment rate for people housed in these developmental centers. $2 million per year. CMS starting in 1993 started approving a states change in a formula that has people would leave these facilities and these facilities by the way they're operated by the state so these are state facilities so that they would for each person that left they would retain basically the cost. Over time has enrollment declined in these facilities the per patient rate skyrocketed which is why they kept all these facilities open. We found across I didn't discover the Pkeepsie Journal story we discovered the IG reported on this and they estimated these overpayments and we read about it and we're like we need to stop this. We called a meeting with CMS and we met with them in June 2012 and we told them that what they were allowing to happen was theft that they were allowing New York to steal from federal taxpayers that that's correct but they were going to allow it to continue for five years because the state had become addicted to basically reliance on these funds. We weren't satisfied with that answer we reported that to Chairman Issa and Chairman Gowdy and we drafted a letter we sent it to CMS we called the hearing and at that hearing they reversed course and they said no we're gonna we've had a change of heart these overpayments and we're going to and we said well you should so we did and anyone heard of Medicaid upper payment limits so Medicaid policy again is really complicated Medicaid is prevented from paying more than what Medicare would pay for like equivalent services and it's really complicated to figure out well is Medicaid actually paying more than Medicare no one really knows how to figure these things out that said I made an estimate that these overpayments started in 1990 and went on through 2011 and the federal share of the overpayments for that two decades was $15 billion just for these facilities in New York which was a small part of New York's overall Medicaid program. CMS eventually went after the state for two years of those overpayments and collected over $2 billion back from the state so that was the day that I said I saved the federal taxpayers more than a billion dollars and when I asked for a salary increase and was denied but the point of this story is that states the state knew what it was doing it knew that these facilities were a cash cow and CMS was either oblivious or beyond negligent in allowing it to happen second case Minnesota managed care so at this we had a hearing in 2010 or 2011 some people in Minnesota started sort of whistleblowers in Minnesota started raising concerns that managed care the state was paying companies to deliver Medicaid managed care way too much way above what the actual real value of that spending would be and Trevor do I have those and what raised Senator Grassley's concern he led this investigation was a refund that one of these insurance companies gave to the state have you heard of the insurance company saying Medicaid's paying us too much so we have to return money to the state so they decided to return $30 million to the state because they received too much in Medicaid payments and this is what the commissioner of the Minnesota Department of Health and Human Services emailed another person in that department about the proper way to discuss this she wrote in order to have a good chance of keeping all this money it must be characterized as a donation if a refund feds clearly get half on redrafting also I thought we were going to handle this through phone calls right so when you get a when you get an email like that and you're working on congressional oversight you're like hot dang we're gonna have this person come and testify and she did come and testify and what Minnesota was doing was very creative they were overpaying the companies for Medicaid they had state only health plans in Minnesota they were underpaying insurers for those state only health plans they made a requirement that if you are going to participate in Medicaid you need to participate in these state only health plans so what was happening there was a cross subsidy coming in the federal reimbursement coming in through Medicaid was cross subsidizing the state only health insurance plans when we wrote to CMS about it we're like did you know what's going on because they're supposed to certify the rates are actuarially sound they're like well we didn't know what was going on right this is we approve the rates but really we didn't know what they were doing third example braces in Texas an investigative journalist out of Dallas did a report in I guess early 2012 called Crooked Teeth and the motivation was all of these little dental Medicaid shops were popping up and putting braces on everybody all these kids they were doing root canals on like toddlers I mean the stuff that they were doing was was abominable Texas spent Medicaid programs so braces are generally not a medical necessity unless you like have some major problem with your teeth and there was supposed to be a review process where people in order to get Medicaid you would get examined and Medicaid would sign off it was just a rubber stamp process where everyone at the state agency that applied through this process they just got braces again federal government had no idea what was going on right until this was highlighted we had a hearing and then a whole bunch of investigations happened and actually I haven't followed I don't know what the conclusion of all this was I know there is some lawsuits have been brought against certain certain of these practices in Texas and in other states the last one is health insurance tax is anyone familiar seeing the news stories on the health and the Medicaid this is a provider tax on insurers in California recently so like I said on provider taxes it is supposed to be broad based so you're not supposed to just single out Medicaid managed care companies and assess the tax on them but states like California and Pennsylvania that's what they were doing if you were an insurance company you weren't selling out Medicaid you weren't facing any pain from this tax so it was really just an explicit kickback to managed care companies in California in July 2014 administrator at CMS I guess the Medicaid director at CMS Cindy Mann sent a letter out that said it was generic said we've heard a lot of states are out of compliance with this tax and you need to come into compliance well it turns out that California was out of compliance and that there was a risk of was it like a billion and a half dollar hole in the California budget and they just came to some agreement on it and I'm not sure what the specifics of the agreement are but there is a quote in the story from someone involved with the negotiations and her quote is basically what we did was so complicated I don't even understand what it is and when you have someone saying this is so complicated I don't understand what it is you should think who understands the complications well it's the interest that are going to benefit from this this was a report that I have on here in 2013 the oversight committee released a bipartisan release the committee report two committee reports in the four years that was chairman this was one of the reports it was on misspending within New York's Medicaid program and it highlighted the developmental center example that I discussed as well as numerous other things that the committee found and highlighted how New York was sort of inflating costs and passing these bills to federal taxpayers lesson number four and I think this is like really important and goes against conventional wisdom conventional wisdom is Medicaid underpays providers and that is certainly true in some cases I think it's generally true for primary care in several states but when you look at one a lot of institutions have lobbied for Medicaid expansion if Medicaid really underpaid why would they want a larger presence in their state and then you have this example of so I think the story is some providers in Medicaid are underpaid but a lot of organized providers in Medicaid hospitals nursing homes they are not underpaid you have dish payments you have supplemental payments that are pretty significant you have the example that I gave in New York City of these two hospitals the $500 million Goldwater that received the $500 million in supplemental payments for less than $100 million in costs ok I'm going to wrap up Trevor big question for thinking about reform I think the program needs reform we're spending a lot of money I don't think we're getting results from the program that justify I'm an economist I think what are the incentives we need to realign the incentives in the program so how can we realign the incentives to get more value for less spending we also have to think this program is so humongous and complicated does it make sense to have a program for lower income kids and their moms grouped with seniors who have long term care needs is there a different way to think about that I think the biggest problem in Medicaid policy is the open-ended reimbursement of state Medicaid expenditures it disincentivizes both states and the federal government from really caring whether we're getting good value for this program I think it obviously biases state decisions in the favor of Medicaid at the expense of other state priorities like education, transportation infrastructure provider taxes I just wrote a paper that we released on Tuesday on Medicaid provider taxes one of the things I really try to do in the paper is emphasize that there is some bipartisan agreement on the problem of Medicaid provider taxes both the Bush and Obama administrations have proposed reducing the amount that states can raise through provider taxes the bull Simpson commission on the bipartisan ideas it's one big Medicaid idea was to eliminate provider taxes Vice President Biden in 2011 during the budget and deficit talks Vice President Biden expressed support for scrapping them by Forbes piece this week was titled Biden was right it's time to scrap the provider tax scam Biden in Bob Woodward's accounting referred to provider taxes a scam and something that Congress and the administration should be able to come to agreement on finally and I skipped I skipped this slide because I'm out of time this is an to your question on 11-15 waivers being budget neutral Arizona received an 11-15 waiver in 2001 and if you look at Arizona Medicaid spending and US Medicaid spending from 97 to 2001 it basically tracks and then in 2001 Arizona received its 11-15 waiver and that's what happened to Medicaid spending in Arizona versus the rest of the country it increased two, three times the rate so thank you