–The needless Medicaid dilemma, and how to solve it

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.
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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
http://www.rodgermitchell.com

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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

#MONETARY SOVEREIGNTY

–Ben Bernanke’s amazing testimony of lies to Congress

One wonders what Ben Bernanke’s motives are. Of all people on earth, he should understand Monetary Sovereignty, and often he shows signs of getting it. Then he comes out with the most blatant, ridiculous stories, and I can’t imagine why.

Here’s an example in yesterday’s CNBC on-line article:

Rising Deficits Pose Major Threat to Economy: Bernanke
Thursday, 2 Feb 2012, By: Jeff Cox, CNBC.com Senior Writer

Rising federal budget deficits are posing a significant threat to the U.S. economy and are likely to cause a crisis if not brought under control, Federal Reserve Chairman Ben Bernanke told Congress Thursday.

Calling the situation “unsustainable,” the central bank leader pointed out that surging health-care costs, along with the high level of government spending used to pull the economy out of recession, are creating fiscal hazard.

“Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences,” Bernanke told the House Budget Committee. “Over the longer term, the current trajectory of federal debt threatens to crowd out private capital formation and thus reduce productivity growth.”

This is wrong to the extreme. Tellingly, he doesn’t say exactly what the “significant threat,” “financial hazard” or “serious economic consequences” would be.

Will the U.S. be unable to service its debt? No, being Monetarily Sovereign, the U.S. has the unlimited ability to service any debt of any size.

Is he worried about inflation? No, in fact he has promised to keep interest rates near zero, which is a signal he is more worried about deflation.

He never says what the threat, hazard or consequences will be, because there are none. He simply is lying.

And so far as “federal debt threatening to crowd out private capital formation,” this is lie #2. Federal deficits add dollars to the economy, and these added dollars facilitate private capital formation. There is no known mechanism for federal spending to crowd out private capital formation.

At the same time, he also warned Congress not to pull the reins too tightly so as to threaten growth.

That covers his butt on both sides of the question. No matter what Congress does, and what the outcome is, Bernanke always can say, “See, I told you so. You spent too much” (or “You pulled the reins too tightly.”)

The Fed’s balance sheet stands at $2.9 trillion, swelled by purchases of assets such as Treasurys and mortgage-backed securities. The goal of quantitative easing has been to bring down interest rates and encourage investors away from low-yielding fixed-income vehicles and into higher risk such as stocks and real estate.

The Fed always has set interest rates by fiat. It doesn’t need QE for that purpose. Instead, the Fed’s purpose was to add dollars to the economy, the very thing Bernanke warns Congress not to do. And can you imagine Bernanke now telling the nation to invest in higher risk securities, encouraging the speculation he previously has blamed for the recession? It’s beyond belief.

Bernanke has begun, more and more, to channel his predecessor, Alan Greenspan, by speaking in tongues, so that no one can understand what he’s saying. Unfortunately, like Greenspan, he is doing the nation a major disservice by not telling the truth.

The Fed gets far too much credit and far to much blame for the economy. It is only a bit player to the real stars of the the show: Congress and the President. Congress loves to cover its own butt by ragging on the Fed for Congress’s own errors, and Bernanke is a handy whipping boy. But the Fed does have the power to educate with authority, and if only Bernanke would, at long last, come out and speak the truth. Ah, if only.

One wonders, what are his motives for lying? Is he so fearful for his job, he will say whatever his bosses expect?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

#MONETARY SOVEREIGNTY

–Extra! Extra! Read all about it! Chicago Tribune sets record for most ignorant editorial

Sometimes you read an editorial that is so amazingly ignorant, you are compelled to shake your head in wonderment. This Chicago Tribune editorial, titled “Please earn your pay. Is responsible spending and cutting really so hard?,” flies above even that high bar.

The editors began by quoting this paragraph from the CBO (Congressional Budget Office) report:

In part because of the higher tax rates and curbs on spending scheduled to occur this year and next, CBO expects that the economy will continue to recover slowly, with real GDP growing by 2.0 percent this year and 1.1 percent next year. … In CBO’s forecast, the unemployment rate remains above 8 percent both this year and next. … Congressional Budget Office

O.K., Tribune. You quoted it. But, do you understand it? Higher tax rates and spending curbs lead to a slow recovery. Repeat it ten times.

Americans with normal vision could go blind reading all the fatalistic projections like those issued Tuesday by the nonpartisan Congressional Budget Office. Or citizens instead could lessen their stress by asking everyone who works in the U.S. House, Senate or White House: Please, earn your pay.

The CBO’s new Budget and Economic Outlook doesn’t lash our federal lawmakers for failing to do their jobs. It does, though, document the rapid rise on their watch of federal debt as a percentage of our gross national product — from an alarming 68 percent in 2011 to a siren-wailing 75 percent in 2013.

Tribune editors. Stop and think. The CBO’s “fatalistic projection” blamed higher taxes and lower spending, i.e. deficit reduction, for projected SLOW growth. Does all your siren-wailing deafen you to the plain English meaning of “higher taxes and curbs on spending”?

The good news is that under provisions of current federal laws, the debt would become more manageable a few years from now.

Trib Editors, the CBO is trying to tell you that’s the bad news. A “more manageable” debt will make for slower growth.

The committee says projecting a rosy reduction in federal debt as a share of our economy assumes that lawmakers will do four things that the committee rates as highly unlikely: (1) allow the tax cuts of 2001, 2003 and 2010 to expire as scheduled, (2) suddenly allow the alternative minimum tax to smack millions more households, (3) fail to enact another so-called doc fix to preserve Medicare payments to providers, and (4) stick to automatic spending cuts triggered by Congress’ failure last year to reach a “supercommittee” deal on cutting future deficits and debt.

If you instead think that Congress and the White House will try to weasel out of Washington’s current and controversial commitments, then the true projected increase in debt would be enormous: The CBO says debt held by the public would rise to 94 percent of GDP in 2022 — the highest figure since just after this financially exhausted nation ended World War II.

At the end of World War II, and until August, 1971, the U.S. was monetarily non-sovereign, and as such, could exhaust its ability to pay its bills. Sadly, the Tribune editors have zero understanding of the differences between Monetary Sovereignty and monetary non-sovereignty, the very foundation of economics.

What does this mean? That the politicians we send to Washington are fiddling while the taxpayers’ future burns. Expanding debt burdens will devour ever more of our government’s resources.

Exactly how does increasing the money supply, otherwise known as increasing the “debt”, devour government’s resources?

Congress and the White House spent most of 2011 failing, miserably, to reach a Go-Big deal on spending and revenue that would begin to curb the nation’s runaway debt — currently rising toward $16 trillion. Democrats fought spending cuts. Republicans fought tax cuts. Our own preference has been for a three- or four-to-one ratio of cuts to tax hikes.

Don’t ask them why. They don’t know. I guess “four-to-one” has a nice feel to it.

Many senators, like irresponsible legislators in Illinois and other profligate states, act as if some robust economic recovery will spare them from offending their political bases and actually … cutting … deficits.

Yikes! More proof the Tribune editors don’t understand the differences between the states (monetarily non-sovereign) and the federal government (Monetarily Sovereign).

The CBO is ready to puncture that silly-gas balloon. The agency warns that the trajectory of future deficits probably depends less on how well the economy performs than on “the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year.”

No, Tribune editors, the CBO said tax increases and/or spending cuts would slow the economy. Try reading the report, again.

That is, lawmakers really do need to decide whether to let the Bush and Obama tax cuts expire, which would raise taxes in a weak economy, and whether to let across-the-board spending cuts take effect as scheduled in 2013.

O.K., you’re starting to get it. Raising taxes in a weak economy is a bad idea. Do you know why? Because taxes take money out of the economy. So do spending reductions. See, taking money out of the economy slows the economy. This isn’t rocket science. It’s economics.

Better to reform the tax code now, take steps to constrain the growth of entitlement spending tomorrow, and make the spending cuts and revenue hikes that will begin to lower our debt. Those measures would prime the U.S. for growth, encourage businesses to expand, and create more jobs.

OMG! Tax increases and spending somehow would “prime” the U.S. for growth?? And encourage business to expand?? And create more jobs??

How? If that nonsense were true, why don’t you want to do it in a weak economy?

Members of Congress, Mr. President, please, earn your pay.Members of Congress, Mr. President, please, earn your pay.

No, Trib editors, earn your pay. You’re supposed to inform your readers, not feed them BS.

I award the editors of the great Chicago Tribune, five dunce caps, the meaning of which they probably will not understand.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

#MONETARY SOVEREIGNTY

–Another open letter to the President of the United States

President Obama continues to promise he will reduce the federal debt, or at worst, not let it grow. During the next nine months, leading to the election, we probably will hear repeated assurances, not only from him, but from whomever the Republicans nominate, that the debt will be “controlled,” we will “live within our means” and that we will be “fiscally prudent” – all nonsense, worse than nonsense – harmful – for a Monetarily Sovereign nation..

I don’t know whether the President truly is ignorant of economics or merely says what people want to hear. In either case, he should be ashamed. A real leader learns the truth, does not fear the truth, and will speak the truth. One day the world will judge Barack Obama. It will find him brave or cowardly, honest or deceitful, knowledgeable or ignorant, strong or weak.

Most presidents care deeply about their legacy. I hope President Obama does. Perhaps he will see this letter or others expressing similar facts.

Mr. President,

Every form of money is a form of debt. The money measure called “M1″ includes: Currency (debt of the federal government), traveler’s checks (debt of the issuer) and demand deposits (bank debt). The measure called “M2″ also includes savings deposits and CDs (bank debts). The measure called “M3″ also includes larger liquid assets (debts of the issuer).

All the “Ms” are money and debt. The broadest money measure, which includes all the Ms, plus additional forms of money, is what the government calls: Debt Outstanding Domestic Nonfinancial Sectors – DODNS. People owning a great deal of DODNS are wealthy.

Money/debt is what nourishes every economy. Money/debt is the sustenance, the support, the driving force behind every economy. Think of money/debt as the economy’s food, without which the economy cannot survive. When the food supply, i.e. the money/debt supply, grows, the economy grows, as this graph demonstrates. Note the parallels between Debt growth and GDP growth:

Today, our economy is starved of its food, so it grows slowly or not at all. Remarkably, to cure the starvation problem, you have have set the fool’s goal of trying to grow the economy while withholding the economy’s food. You may not recognize the equality between debt and money, and think that while money is good, debt is bad. If so, it is like believing cars are good, but autos are bad.

The U.S. became Monetarily Sovereign on August 15, 1971, which put us in the enviable position of being able to create money at will (unlike the euro nations, which are monetarily non-sovereign).

The government creates money by deficit spending. To pay a bill, it simply instructs a creditor’s bank to mark up the creditor’s account. The government can send those instructions endlessly. It never can run short of instructions. It needs neither to borrow nor to tax. That is the definition of Monetary Sovereignty.

The single biggest economic problem facing America and the world is the widespread ignorance regarding Monetary Sovereignty – the belief federal finances are like personal finances. This ignorance has led and will continue to lead, to an endless series of recessions – so far, on average, one every five years — along with their resultant human misery.

We citizens only can pray that one day we will have a leader, whose knowledge and courage will allow him to reveal the truth, and put us on a path to economic growth. He will use our Monetary Sovereignty to feed our economic growth.

If you prove to be that leader, your name will be added to the list of great American Presidents: Washington, Lincoln, Roosevelt et al. If not, your name will be listed alongside Hoover. You hold your legacy in your own hands.

Good luck to you – and to all of us.

Rodger Malcolm Mitchell

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

#MONETARY SOVEREIGNTY

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