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God Protect us from Idiots: The Orszag edition

I was making a final pass through the day's news when I came across this piece of rank nuttery by Peter Orszag, the Times' newly hired gasbag. Orszag makes the claim that "states tend to rob education [as in state universities] to pay for Medicaid during economic downturns." Inadequate state funding not just of higher education but of education K-12 has been a scandal for decades. Curiously, state budgets contain other items besides just higher education and Medicaid. States, for example, have underfunded their pensions for years. They have let their infrastructure deteriorate.

Yet Orszag keys in on only these two. Why? You think he just might have an agenda he's pushing? And it's not like we haven't seen this kind of skewed thinking before at the federal level, you know where Orszag directed first the CBO then the OMB. It's always entitlements there that are going to bust the budget, not wars, a bloated military, and tax cuts for the wealthy that A) we can't afford and B) they don't need. But it is precisely this kind of debunked, intellectually bankrupt thinking that Orszag brings to state finances.

There is so much wrong with this op-ed. It is the kind of product that if an undergrad turned it in, you would return it bleeding red. For example, Orszag compares professor salaries at a couple of private schools vs a couple of public state schools. Over the years, the salaries at state schools began to lag. Forget that this is not anything like a statistical sample. Orszag doesn't look for deeper causes for why such salary discrepancies came to exist.

In the last 30 years, state budgets have been squeezed by anti-tax forces. This was something that didn't just occur in downturns but all the time. That higher education spending might be constrained on the revenue side doesn't seem to occur to Orszag.

In the same time period, elite private schools saw their endowments balloon (at least until the meltdown but by then their pay scales were already in place). During this time too, the rich were getting a lot richer and could pay the much higher tuitions at the private schools. Does Orszag explore how tuition has increased in state vs private schools? Of course not. Does he look to see if private schools, like Harvard, that got burned in the high heat of their speculative Summers are hiring at the same rates they were in the past?

You must be kidding. Orszag has a point he wants to make and he isn't going to let reality or a mountain of contrary evidence get in his way.

Even though he admits it is a weak authority, Orszag invokes the US News and World Report college rankings. To put it mildly, such rankings are a con. They are a sop to parents to make them feel better (or in some cases worse) about the amount of money they are spending to send their kids to school. But seriously what do they mean in terms of education?

We all know some public and private schools that could qualify for Podunk U, but when you get to the level of flagship state and elite private institutions, they all provide a reasonably good education. Whether they provide as good a value for the cost (and debt) is another matter. You also have to wonder if people are paying the high tuition rates of private schools because they think the education is so much better or whether the connections are. Again Orszag doesn't get into any of this. Like many a freshman confronting the writing of their first research paper, he uses a poor source to make an overly broad point.

So what in the world is Orszag trying to do with all this bunkum? Well, he is trying to make what is on the surface a liberal point. States should recieve more federal aid for Medicaid during downturns. Would states use this money to prop up higher ed? Just something else Orszag doesn't address. But his final kind of iffy contention is that

the temporary Medicaid help provided by Congress and the Obama administration over the past two years may have not only helped avoid cutbacks in Medicaid while bolstering the economy, but also improved your child’s college education

Now as a former CBO and OMB director you think he might actually cough up some numbers here. How much states have been paying for Medicaid, how much they received each of the last two years from the federal government, what increase was involved, etc. Orszag could cite numbers when it came to bogus college rankings, but real budget numbers? Not so much.

Nevertheless, he proclaims that this article will now serve as a basis for future forays into the importance of containing healthcare costs. This from a man who was instrumental in the cutting of $547 billion over 10 years from Medicare and Medicaid (the largest cost reductions in Obama's healthcare sellout, and again this is not Medicare Advantage). I think it is pretty obvious exactly how Orszag wants to "contain" those costs, even if he is wrapping it in this bogus sugar pill of helping higher education.

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caseyOR's picture
Submitted by caseyOR on

I can't speak to every state, but in Oregon education has been underfunded for decades. K-12 $$ is handed out by the state, thanks to a, wait for it, property tax rollback and limitation measure passed as a ballot initiative 20 years ago. As for higher ed, well, one of our oft-quoted statistics here in Oregon shows that we spend more on corrections (prisons, etc.) than we do on high education because of ballot initiatives that have required the dedication of state funds to prisons. Our $$ don't go to Medicaid. They go to prisons.

Medicaid is jointly funded by the Feds and each state. Like many states, in hard times Oregon cuts its funding to Medicaid; it does not increase it. And, no federal dollars designated for Medicaid can be diverted to anything else in the state budget. It is simply not allowed. Oregon uses a lottery to determine who among all the eligible Oregonians, will get that precious slot on the Oregon Health Plan (our Medicaid program).

I find it very hard to believe Orszag does not know the rules that govern Medicaid monies. I mean, seriously, he headed up both OMB and the CBO and he doesn't know that federal Medicaid dollars are restricted funds? He is either very stupid and unqualified for every government job he has ever held, or he is a liar.

CMike's picture
Submitted by CMike on

Peter Orszag is proposing that the federal government finance a larger percentage of Medicaid benefits during recessions so that states would have an incentive to maintain the benefits they are providing and use any savings to maintain other programs. Now there may not be any savings because there are pressures to increase the number of people enrolled on Medicaid during a recession and, if there are savings, Oregon and other states may use them to expand its prison system or to offset tax reductions but that's not what Orszag is suggesting Oregon should do.

Orszag goes on to suggest that the longer term solution for rising state and federal Medicaid expenditures is to reduce the rate at which health care costs are rising.

CMike's picture
Submitted by CMike on

Perter Orszag writes:

Research I’ve done with Tom Kane of Harvard and the Gates Foundation finds a surprisingly strong connection: over recent decades, as state governments have devoted a larger share of resources to rising costs of Medicaid, the health care program for the poor, they have cut support for higher education....

These Medicaid cost increases have closely tracked cost increases in the rest of the health care system over the past three decades. So the problem is not Medicaid per se; the fundamental problem is rising health care costs as a whole.

Our research suggests that states tend to rob education to pay for Medicaid during economic downturns.

On this last point, is it being suggested that Orszag is confusing correlation for causation?

Orszag goes on:

How can we reverse this trend? One step is to provide more federal support for Medicaid when downturns hit, because that is when states tend to put the squeeze on higher education. So the temporary Medicaid help provided by Congress and the Obama administration over the past two years may have not only helped avoid cutbacks in Medicaid while bolstering the economy, but also improved your child’s college education.

The more fundamental response, however, is to get a better handle on rising health care costs, something I’ll focus on in my next few columns.

Unless you're hostile to the idea of revenue sharing or you're a doctor or heavily invested in pharmaceuticals or hospitals, I'm not getting what sounds nefarious about this.

Wikipedia says:

Unlike Medicare, which is solely a federal program, Medicaid is a joint federal-state program....The wealthiest states only receive a federal match of 50% while poorer states receive a larger match.

Medicaid funding has become a major budgetary issue for many states over the last few years, with states, on average, spending 16.8% of state general funds on the program. If the federal match expenditure is also counted, the program, on average, takes up 22% of each state's budget.

According to CMS, the Medicaid program provided health care services to more than 46.0 million people in 2001. In 2002, Medicaid enrollees numbered 39.9 million Americans, the largest group being children (18.4 million or 46 percent)[citation needed]. Some 43 million Americans were enrolled in 2004 (19.7 million of them children) at a total cost of $295 billion. In 2008, Medicaid provided health coverage and services to approximately 49 million low-income children, pregnant women, elderly persons, and disabled individuals. Federal Medicaid outlays were estimated to be $204 billion in 2008.

Medicaid payments currently assist nearly 60 percent of all nursing home residents and about 37 percent of all childbirths in the United States. The Federal Government pays on average 57 percent of Medicaid expenses.

Looks to me like Orszag has a point. [I'm not following that 16.8%/22% calculation. If you add in just the minimum 50% match expenditure I would think you end up with at least 23.2% of total state spending.]

Should Orszag have argued for more taxes at the state level or less prisons? He seems to be focusing on one large issue here, i.e. the impact of the rapid rise of health care costs on state budgets. That's a big enough topic for one 750 word column I would think.

CMike's picture
Submitted by CMike on

I think Orszag included the discussion of post-secondary state school funding because a lot of people recognize that as a middle-class benefit. He was trying to show how the federal government, by helping out further with a means tested program, could help the states provide something for the large segment of the population that does not receive a direct benefit from spending on Medicaid.

Submitted by Hugh on

Sigh. CMike it is generous of you to try to put the best possible interpretation on what Orszag is saying, but he is being very clear that he is making a causal relationship between Medicaid increases and higher education cuts. Orszag doesn't give anything like the necessary evidence to support this contention. Also as I and caseyOR have pointed out, state budgets have more going on in them than Orszag suggests and beyond that there is the larger macroeconomic picture of which Orszag seems totally oblivious.

What Orszag has done is make a sloppy argument to make a sloppy point. He then wraps it up in concerns about healthcare, but we know from his positioning in the healthcare debate that his "concern" has nothing to do with the concerns about healthcare that ordinary Americans have, or else he would never have been a party to, let alone a leading proponent of, the great Obama healthcare sellout.

To be honest, I find it difficult to understand how or why you should be so interested in defending Orszag. Each of the points you make is a stretch in itself, but taken together they fall apart much as Orszag's own op-ed does. The last figure I saw was that state budgets were looking at a shortfall of $180 billion this year. That will probably be a little less since the recent bill containing aid for them. But it is still quite likely that the shortfalls will be massive, in the $150 billion area. In light of this, Orszag's whole op-ed is at best an irrelevancy. But given his past status and his pulpit at the Times, we should not let such nonsense pass unremarked and uncontested.

CMike's picture
Submitted by CMike on

Hugh says:

To be honest, I find it difficult to understand how or why you should be so interested in defending Orszag.

In this instance, Orszag is advocating for the federal government to increase its share of payments going towards Medicaid benefits. I'm not happy with the profiteering that goes on in the health care industry but I do want people who can't afford medical care to get it. In addition, I'm in favor of the federal government stimulating the economy with deficit spending during the current slump and I think Medicaid is a shovel ready project.

Because there's an ongoing discussion about both health care and government spending issues in the threads at Corrente, I thought I'd explain why my take on Orszag's column is different than Hugh's [yours]. Whether it's Orszag, Palin, Gore, Krugman, or Pat Robertson, it wouldn't matter who. Whenever someone says something I agree with, I'm willing to admit it.

Submitted by Hugh on

Many physicians won't take Medicaid patients because the reimbursements are so low. Orszag, as I pointed out, never says how much extra money went to Medicaid. I'm guessing it wasn't much because otherwise he would have have been shouting it from the rooftops. Orszag is a champion of precisely the poorly functioning, unsustainable system of healthcare that we currently have. The policies he's advocated are a prime reason why the economy is bad, why Medicaid is strained, and why healthcare generally is in the sad shape it's in. This op-ed was just an excuse to shed a few crocodile tears and blow some smoke in people's faces. He takes credit for some limited aid to Medicaid over the last two years, but as he himself notes his main emphasis is on cutting healthcare costs. And if you have followed Orszag at all you would know that essentially means cutting services. In the past, he has done this in the name of "efficiencies", but again if you kept up with the politics that is pretty much what people interested in slashing the social safety net always call their cuts. As I pointed out in the post, this is the same man who sponsored $547 billion in cuts to Medicare and Medicaid as part of Obamacare. These cuts comprise the majority of savings in Obama's healthcare plan.

I want to see good, affordable, universal healthcare for all Americans, but this does not mean I will buy snakeoil from every grifter who comes down the pike telling me that their elixir will cure all that ails me. You seem OK with ignoring Orszag's history, his bad arguments, and worse evidence, and want to accept the one anodyne thing he has to say. Good policymaking does not work that way. Orszag is one of the facilitators of looting in a culture of looting. He throws out some mish mash and you not only are treating it seriously, you are buying it, hook, line, and sinker. The looters want people like you, people who will give them the benefit of doubt, no matter how many times they lie to you, and their lies are exposed, it makes their work so much easier.

CMike's picture
Submitted by CMike on

Hugh says:

Many physicians won't take Medicaid patients because the reimbursements are so low. Orszag, as I pointed out, never says how much extra money went to Medicaid. I'm guessing it wasn't much because otherwise he would have have been shouting it from the rooftops.

The federal government paid out $201.4 Billion for Medicaid in 2008 and $250.9 Billion in 2009 for a 24.6% increase according to Table F-9 in this CBO Historical Data Report.

You think the Medicare bending the curve cuts scheduled for the out years in the Obama health care package put seniors at risk?

CMike's picture
Submitted by CMike on

This OMB 368 page pdf does not break out a number for Medicaid. However, in table 3.1 we see total federal health related expenditures - excluding Medicare and the VA - totaled $281 Billion in 2008; $334 Billion in 2009; and are estimated to come in at $372 Billion in 2010. I'm guessing because the '08 to '09 increase was $53 Billion and we know about $50 billion of that increase was for Medicaid maybe most of that $38 Billion estimated increase from '09 to '10 is also adding to Medicaid dollars.

Submitted by Hugh on

Thanks for the numbers. I really did not have time before now to look for the numbers Orszag should have supplied. You might find the following link useful in that regard:

from 2008-2010 there was a natural $27 billion increase in benefits in Medicaid. As part of the stimulus, there were also injections of $35.5 and $42.5 billion for 2009 and 2010, respectively. These are the two years of enhancement Orszag was alluding to. Without further legislation they end this year.

State budgets are still in a world of hurt, and because this was stimulus money, that's with this money already figured in. The number of uninsured has gone up by 4 million. So even with temporary increases to Medicaid, the overall healthcare picture has gotten substantially worse. Public universities are suffering, granted. The feds should be doing a lot more. My point though was that Orszag's op-ed doesn't come close to addressing any of these realities. He's too busy making some bogus connection between just two elements in a much larger system.