Dr. Scott Gottlieb, an economist, wrote an interesting op-ed in the Wall Street Journal this past week, where he points out studies showing that the quality of care and sources of doctors and hospitals for Medicaid relative to higher acceptance of Medicare and private insurance show up demonstrably in treatment for heart disease and cancer, including coverage for certain prescription drugs and followup care. He notes the anemic reimbursement rates to doctors and hospitals, never mind the bewildering amount of paperwork, rules, and regulations that tie up the Medicaid system and significant exposure to fraud. The Obamaian solution is to offset some of the cost share required of the states to qualify for federal funds--without requiring enforcement of necessary standards to ensure effective, efficient disbursement of taxpayer money--and furthermore to expand Medicaid to include certain unemployed workers. [This is precisely the sort of federal entitlement scope creep that Democrats specialize in; they promise a temporary application, but it almost invariably sticks and then gets extended.] Furthermore, Gottlief points out that money is fungible; that is to say, instead of states having to live within their means, a federal contribution offset to the states for Medicaid expenses simply allows the states to spend the same money elsewhere, without making necessary cuts and, say, improved standards to ensure state (and federal) Medicaid money is deployed more efficiently (less waste and fraud).
Let me make the point more explicit: Perhaps instead of expanding the scope of Medicaid, we should focus more on fixing the leaky bucket, and making sure that the water is used more efficiently. Instead of expanding the target population, we should focus more on improving reimbursement and prescription drug coverage, simplify reporting requirements for doctors and hospitals, and impose strict, effective cost controls. Maintaining an inferior (separate but equal) government healthcare system is the worst kind of segregation one can imagine.
Another good WSJ column was written by Berkeley/Google economist Hal Varian. His point of view largely echoes my own in terms of focusing primarily on the investment side vs. the other three sources of demand: the consumer, the government and exports. The consumer and export sides are highly questionable; part of what has spurred consumer spending is living beyond one's means. A tax credit or cut, which will largely be saved vs. spent, is probably not going to be very stimulating. I would also argue that infrastructure spending, which sounds good from a multiplier effect, is unlikely to make a large-scale short-term impact, it's likely we'll have scalability issues in infrastructure investment (i.e., finding enough engineers and skilled workers to staff projects), the selection of projects will be subject to political manipulation, and we don't want the state governments exporting their infrastructure support financing problems to the national government. I'm a strong supporter of infrastructure projects, including the power grid, but I think that has to be a long-term response, not dressed up unrealistically as a short-term stimulus fix.
The best single thing Obama can do is to reassure the capital markets. He can do that in a series of ways: take investment tax increases off the table and in fact push for business tax cuts and investment credits; stop threatening punitive tax hikes to higher-income individuals whom are key job creators in the private sector; stop talking about tax credits/rebates for people whom do not pay federal taxes; stop raising unrealistic expectations about the short-term job gains related to green technology products and services; say 'no' to state/county/local governments looking for Uncle Sam to bail them out of responsibility for politically unpopular budget cuts; stop expanding the target enrollment of federal-sponsored programs until we have sufficient management planning and control, benchmarks and quality metrics in place and are properly funding the existing envrollments we have. This blending of short-term with long-term priorities Obama is talking about simply confounds analysis. A "Christmas tree" stimulus package, such as the one Obama is proposing, is the product of muddled thinking and judgment and shows an inability to set priorities.
