We intuitively understand that there’s something scandalous about the state of Rhode Island’s overpaying two health insurers by $208 million for Medicaid services, but the reason may not be immediately obvious. After all, it’s federal money, the cause appears to have been an error in estimating, not corruption, and the money will likely be reclaimed eventually. In the long run, no harm, no foul, right?
Well, no. At the first level, this is $208 million that could have been directed toward actual services, rather than filling out the insurers’ balance sheets. At the second level, it’s tax money that the government could have let taxpayers keep and spend on some other economically more-productive purpose. Or (more likely) it’s future tax money that will now have to be collected, plus interest, some day when this piece of the national debt finally comes due.
To my mind, the key paragraph from Katherine Gregg’s Providence Journal article, linked above, is this one:
Although lack of data about the new Medicaid population was the main reason the initial rates had been off, [Executive Office of Health and Human Services Spokesman Michael] Raia acknowledged that the state had been conservative to protect the insurers from financial risk and avoid a scenario where claims were not being paid.
Notice for whom the state — which is supposed to represent the interests of taxpayers — is seeking to minimize risk: insurers and welfare recipients. Those are the real clients and constituents of state government. You and me? We’re the marks.
See, if the state government is “conservative” — by which officials mean taxing and spending more liberally — and takes $208 million of your money that it doesn’t need for the heart-string-pulling project of providing health care to the poor, then it has increased its baseline by $208 million. Even if the government held budgets flat going forward, that’s $208 million that it has to spend on something else… something that might not be as compelling from a moral standpoint.