Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
Monetarily non-sovereign entities (including states, local governments, businesses, the euro nations, you and me) cannot survive long-term without a positive balance of payments, i.e., more money coming in from outside their borders, than leaving.
The reason: Our Monetarily Sovereign government pays bills by creating dollars; you and I pay bills by transferring dollars — and that makes all the difference.
Let’s begin with you and me. To spend, we need income. We cannot create dollars, other than by borrowing. So, short term, we can survive without income, but long term we cannot. We have to pay back those loans.
The same is true for businesses. Long term survival depends on income exceeding expenditures.
And the same is true for state and local governments. Taxes aren’t income for a state; taxes merely are circulation of dollars within the state. A monetarily non-sovereign government cannot survive long term on taxes. It needs a positive balance of payments; dollars coming in (via exports or other payments) must exceed dollars going out. Borrowing provides temporary income, but loans must be repaid — along with interest.
The euro nations suffer the same problem. They cannot create a sovereign currency. Those that are net exporters survive; the others rely on borrowing, which merely buries them deeper.
I mention all this because of an editorial in today’s Chicago Tribune, titled, “Saving Medicaid.” According to Medicaid.gov, “Medicaid and CHIP Provide Health Coverage to nearly 60 million Americans”
Here are excerpts from the Tribune editorial:
Gov. Pat Quinn has called for $2.7 billion in Medicaid cuts in next year’s budget.
The Medicaid cuts will be painful for health care providers and the 2.7 million people who depend on the program. Absent a huge downsizing, however, the state Medicaid program will capsize. The state expects to have about $1.9 billion in unpaid Medicaid bills on hand at the end of fiscal 2012. Without a fix, that backlog will balloon to $21 billion in just five years.
“Unpaid Medicaid bills” mean doctors, hospitals, nurses and pharmacies are not being paid. They are paying for the state’s insolvency. One way a monetarily non-sovereign entity can delay insolvency is to cut expenses, particularly expenses that send dollars out across the border. This is a temporary hold, however. As dollars continue to flow out, repeated cuts become necessary.
One major reason for Medicaid’s faltering health: From 2000 to 2011, the number of people receiving Medicaid services in Illinois doubled. Federal law will land hundreds of thousands more people on the state’s Medicaid rolls starting in 2014 and strictly limits the state’s ability to tighten eligibility requirements.
The financial need grows, but the federal government tells the states whom they must pay.
Two overarching changes are needed to start to save Medicaid:
• Stop services for people who simply don’t qualify. Some recipients don’t even live in the state.
Payments to out-of-staters are particularly damaging.
Some make too much money to get health care designated for the poor. An estimated 100,000 to 300,000 people can be removed, saving $100 million to $700 million a year.
The government says, “Children in families with incomes up to $44,100 per year (for a family of four) are likely to be eligible for Medicaid coverage . . . Covers people with disabilities, people with incomes up to $1,868; many states go to $10,890 Federal Poverty Level. . . Beginning on January 1, 2014, adults under age 65 with family incomes up to $14,484 will be eligible for Medicaid.”
Summary: Medicaid takes care of those below the Federal Poverty Level. But who are those 100,000 to 300,000 people Illinois wishes to remove from the rolls? Are they wealthy, or are they simply not poor enough?
* Speed the switch to managed care to save money and improve quality of care. Managed care generally means patients are assigned a “medical home” — a doctor who oversees their care.
Translation: Put the financing onus on doctors and hospitals.
Beyond that, program cuts and eligibility changes will be necessary. Setting lower income eligibility on adult coverage in Family Care would save almost $50 million.
Translation: Eliminate those at the upper end of poverty — though still impoverished.
Prescription drug coverage costs Medicaid $814 million a year. Eliminating that wouldn’t be wise because many drugs help control chronic conditions and prevent expensive hospital stays. But drug coverage can be prudently trimmed. If Medicaid recipients were limited to five prescriptions a month, the program would save a whopping $136 million.
Translation: Make sure your health problems don’t require more than five prescriptions a month. This means the sickest people will be penalized most.
Possibly on the block: Illinois Cares Rx, a supplemental drug program for seniors that doesn’t draw federal reimbursement. It costs $72 million a year.
Translation: Who cares about poor seniors? They’ll die soon, anyway.
There’s lots more on the table, such as hospice care (about $89 million)
Translation: People on hospice don’t vote.
Adult dental care ($51 million); durable medical services and supplies such as wheelchairs and ventilators ($150 million); adult speech, hearing and language therapy ($411,000); podiatric services ($5.8 million); bariatric surgery ($8.4 million); group psychotherapy for nursing home residents ($14 million); even therapy for refugees who were torture victims in their native countries ($133,000).
Translation: We don’t care if their teeth rot, they have to crawl, they can’t breath, can’t talk, can’t hear or are psychotic. They should have thought about those problems when they were youngsters.
All of that still doesn’t come close to $2.7 billion. That’s why there’s a 6 percent cut for hospitals and nursing homes in play. Savings: $550 million. Hospitals argue that the state should exhaust other options before trimming providers, who are already reimbursed at low rates. But providers likely will feel some pain. “Everybody,” the governor says, “will take a haircut.”
Translation: “Haircut” is the euphemism-du-jour for screwing. Creditors take a haircut when debtors don’t pay. In the above case, the only one that doesn’t take a haircut is the state.
Bottom line: The entire philosophy behind Medicaid — making monetarily non-sovereign states pay for some of their residents’ health care — is nuts. It would be no burden on our Monetarily Sovereign, federal government, which actually creates dollars by spending dollars, to pay for everyone’s health care.
The notion that our Monetarily Sovereign, federal government can’t afford health care, but the poor and middle class can, is beyond nuts. It’s stupid/nuts. But that is exactly what the debt-hawk, Tea/Republicans try to make the 99% believe.
Putting the burden on the states, actually puts the burden on health care providers and on the poor. The religious right will tell us that it is the fault of the poor and middle classes that they cannot afford health care. If only those people weren’t so lazy they’d get jobs that provide employer health care. And, if only they weren’t so clumsy, they wouldn’t need disability care. And if only they didn’t have so much sex, they wouldn’t need children’s health care.
The 99% are such a burden on the 1%, aren’t they? And think about it. Isn’t the federal debt a terrible burden on you, while your personal debt is no problem at all?
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