The Bush administration is trying to take health insurance away from poor people again, this time by creating regulations that would force states to lower taxes on health care providers. The taxes help states pay for health care services covered under Medicaid, and result in higher matching grants from the federal government. The states effectively offset the cost of the tax with higher reimbursement rates for the taxed health care providers, which are made possible by the federal matching grants.

The move is opposed by all the relavant stakeholders, including:

• The National Governor's Association
• 330 Members of the House of Representatives, including 82 Republicans
• The American Hospital Association and the American Health Care Association

The new regulation would "save" the federal government $12.2 billion. If the states lose the revenue from these taxes and the federal grants, they are likely to cut services. Thomas Nickels, senior vice president of the American Hospital Association, said that “if provider taxes are cut, the Medicaid program will be reduced, and that will harm beneficiaries. We do not see a political will, at the federal or state level, to supplant provider taxes with other types of revenue.”

The process used here stinks, frankly. This should be a legislative proposal, not a regulation. In fact, the President admitted as much when he asked Congress in his FY 2007 budget proposalto enact legislation that basically does the same thing. If the President wants a benefit cut, he should do it the old-fashioned way and let Congress vote on it.

The problem is, Congress already rejected the cut. Robert Pear wrote in the New York Times that advocates are arguing that Bush "is doing by regulation what he unsuccessfully asked Congress to do by legislation in the last two years."

Health and Human Services Michael O. Levitt says the cut will "remove incentives for states to shift the responsibility to fund their share of the Medicaid payment to health care providers." But since health care providers are effectively reimbursed for the tax by federal matching grants, what he really means is that states shouldn't shift responsibility to the federal government.

As Congress has shown, most of the federal government doesn't really seem to mind helping the states out a bit. The Bush administration is alone in its shameful behavior.

A consequence of our lazy, no-good, "do-nothing" Congress is that state governments have had to tackle problems that were once the province of the federal government. Massachusetts created a universal health care insurance plan. California just signed a pact with the British to reduce global warming. Lots of states have raised the minimum wage. And so on.

Don't think that the states are taking this in stride. They're angry. David Broder has an op-ed in the Washington Post today that lets the governors -most of whom are Republicans- vent their frustrations with the feds. Take the governors seriously, because about 5 of them want to be President, and every governor's support will be crucial for Congressional candidates in the upcoming elections.

Anyway, the status quo won't last long. The New York Times reports that states, counties and municipal governments are looking down the barrel of a $375 billion shotgun. That is, it's estimated that these governments have underfunded public employee pension plans by about $375 billion (though no one is sure what the number really is). That's not including private pensions, which are very much in trouble, or federal employee pensions, which are of course underfunded, too.

Doing something about pension plans is tough. The federal government only insures private pension plans, and hence is not much help. Local governments have a hard time running deficits, since they can't print their own bonds. Cutting pensions, too, is not an option, since it would violate most state constitutions to do so. The money will have to come from local taxpayers or local programs.

But that hasn't worked out so well. San Diego, which has a $1.4 billion shortfall in its pension system alone, has taken to cutting funds for vital city infrastructure to pay off its pension obligations. Consequently, the roads are falling apart, and beaches have been closed for sewage spills, says the NYT article.

Something has to give. Exactly how that will play out is anybody's guess. What is pretty certain, though, is that the federal government cannot keep delegating its responsibilities to the states for much longer. Rather, it's the states that will need more help from the feds once its obligations become too much to bear. Maybe then Congress will do something.

Washington Post Contempt for Congress

New York Times Public Pension Plans Face Billions in Shortages

Posted by Matt Lewis, 11:00:19 AM