Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

Most people do not understand the differences between Monetarily Sovereign (the U.S. federal government) and monetarily non-sovereign (you and me, the states, counties and cities). Spending by us people is limited to the dollars we have or are receiving. So, by intuition, most people feel the U.S. government is monetarily non-sovereign, i.e. like us, should spend no more than it collects in taxes.

Thus, we hear all those misguided concerns about federal deficits and debt, when in fact, deficits are necessary for economic growth and debt could be eliminated tomorrow.

I frequently criticize the editors of the Chicago Tribune for their ignorance of Monetary Sovereignty, and their tacit belief the U.S. is monetarily non-sovereign. In this, they are little different from the vast majority of media writers, politicians and even economists in America. We as a nation, suffer for their ignorance.

But while the Tribune is clueless about federal financing, they can be equally clueless as regards state and local financing, where they really should know better. This is what they wrote about Medicaid, a program largely funded by the states to benefit the poorest among us:

Editorial: Chicago Tribune: Time to move on Medicaid spending
February 4, 2012

When Gov. Pat Quinn spoke Wednesday about the state of the state, he gave a brief nod to the groaning cost of Illinois’ single biggest operating expense: Medicaid.

The state expects to have about $1.7 billion in unpaid Medicaid bills on hand at the end of fiscal 2012. That backlog will balloon to $21 billion in just five years if the state doesn’t overhaul Medicaid spending.

As you read this, ask yourself, “Why are states, which have limited finances, forced to pay? Why doesn’t the federal government, which has the unlimited ability to service any bills of any size, pay for Medicaid?”

That will be a diaster for the 2.7 million Illinoisans who depend on Medicaid, for taxpayers and for medical providers. More doctors are likely to stop accepting Medicaid patients because they won’t get paid remotely close to on time.

Quinn’s budget address is Feb. 22. That’s when we should learn the details of how he proposes to curb Medicaid spending. Here’s what he needs to do:

Speed the switch to managed care. Managed care generally means patients are assigned a “medical home” — a doctor (it could be an HMO-style clinic) who oversees their care. Doctor and hospital fees are geared to delivering better health care, not just more of it.

• Accelerate the move of residents from obsolete and expensive institutions for the developmentally disabled to community-based care.

End Illinois Cares Rx. That’s a prescription drug program that supplements coverage for (poor) seniors. But the feds don’t help pay for it. Eliminating it will save $54 million.

According to the Illinois Cares Rx web site: “Illinois Cares Rx provides prescription drug assistance to low-income seniors and disabled persons. For participants enrolled in Medicare Part D, Illinois Cares Rx helps lower the participants’ copayments and cost-sharing. Illinois Cares Rx provides direct prescription drug coverage for participants who are not eligible for Medicare.”

So eliminating this service will stick the poorest, elderly Illinoisans with $54 million in expenses they can afford even less than can Illinois. The whole notion, of forcing poor people to bail out the state, is an anathema to me. The Trib is dead wrong on this one.

Illinois Department of Healthcare and Family Services director Julie Hamos is expected to deliver a wide-ranging list of Medicaid cost-cutting options to a bipartisan committee of state lawmakers later this month. The goal: Save as much as $2.7 billion in the $14 billion Medicaid budget.

If the “wide-ranging list” includes only efficiencies, I’m all for it. But if it merely transfers expenses from the state to the poorest people, it will be a disgrace.

“Everything has to be on the table to keep the program solvent,” Illinois Sen. Heather Steans, D-Chicago, tells us. Nothing’s final yet. But we like what we’re hearing.

The state could save big, for instance, by capping how much it will pay per patient for so-called “optional services.” That includes dental work and prescription drugs. The idea: Patients should be allowed to choose from those services, but the state would set a cap on how much it will spend for each patient.

If the state will save big, who will pay? Doctors? Dentists? The poor patients? Or will this all come down to greater efficiency? (I doubt it.) Making doctors and dentists pay is stupid. Forcing the poor to pay is ridiculous and heartless.

Another good idea: Require a co-payment from Medicaid recipients for emergency room visits that aren’t emergencies. That could save millions by cutting down on expensive visits to the ER.

People take non-emergencies to the emergency room, because they can’t afford health insurance. These people are poor. So to require co-pays merely will discourage them from seeking medical help. Their non-emergency situations will devolve to real emergencies, which will cost the state even more, not to mention the terrible human toll.

Providers also need to be in the savings mix. For Medicaid to thrive, hospitals need to reduce costly readmissions. Illinois has the highest rate of such readmissions in the nation, according to a 2010 study by the Center for Health Care Strategies Inc. The state should offer hospitals incentives to cut that rate, and penalize hospitals that fail.

The question this editorial doesn’t address is, “What causes readmissions?” Without examining the various causes, merely saying they “need to reduce readmissions” makes no sense.

Those are just some of the ways to save money while delivering quality care. There are many more.

There is very little in the editorial that discusses the preservation of quality. The focus is on transferring costs from the state to the poor.

Let’s also remember that the state’s Medicaid program will add up to 800,000 people beginning in 2014, when the federal health care overhaul kicks in. The feds will fully reimburse the state for those beneficiaries … for three years. Then Illinois will be stuck with a slice of that bill.

And therein lies the problem. If the feds “will fully reimburse the state” for three years, why don’t the feds continue to reimburse the state?

By what logic has medical care for the poor become an obligation of monetarily non-sovereign, financially strapped states, when the Monetarily Sovereign, federal government easily can and should pay the whole thing? The states’ only recourse is to shift the cost to the poor, who because they can’t afford it, simply will fail to receive medical services, until they are so sick, they are dragged to the emergency room, where costs are highest.

I wonder how many of the Tribune editors are on Medicaid.

Far better, it would be, if everyone could receive medical services early, before their conditions became more serious — better financially and better medically, and better humanely. The federal government can afford to do this.

Funny how all our economic problems seem to boil down to ignorance of Monetary Sovereignty.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports