The struggle over national health care is consuming vast amounts of time and energy in Washington. Congressmen, aides, staff, and the White House have all put countless hours and untold effort into drafting and redrafting health care legislation. Considerable amounts of time have been put into debating the issue, making speeches, and issuing press reports. Obama and leaders in Congress have time and again warned the public about the costs of doing nothing. They make a good point.
There are at the moment over 1,000 different pieces of legislation before Congress. Some of them are important. There is the Cybersecurity Act. There is the Food Safety Modernization Act. There are bills concerning immigration reform, credit card reform, and mortgage reform. There are bills concerning the environment and clean water. There are also two conflicts we are at the moment fighting in the Middle East. There is the growing tension with Iran. There is increasing friction with China. And, of course, there is the struggling economy.
Despite the persistent and strident rhetoric in Washington about the costs of doing nothing, the issue of health care reform is not simply a question about doing something or doing nothing. The government has many things to do. It is a question about persisting to the point of obsession to push health care reform into law or doing something else. As for the costs, we have a pretty good idea what the cost of passing health care will be: $1 trillion. The cost of not passing it will be considerably less.
There is an election later this year which could go a long way towards resolving the dispute. The issue is not going to go away. The country might very well be better off if Washington can find other things to do in the meantime.
Friday, March 12, 2010
Wednesday, March 10, 2010
Serious About Waste and Fraud.
Continuing his struggle for health care reform, Obama announced that if his program is enacted, he will get serious about rooting out fraud. He even proposed to bring in private auditors to run down those suspected of fraud. To convey the determination of the administration, those private auditors were referred to as "bounty hunters". They will be men and women dedicated to bring scofflaws and cheats to justice. Their ruthlessness and determination will be ensured because they will be able to keep some of what they collect. While unwed mothers and cheats may be intimidated by bounty hunters, hospitals, doctors, and insurance companies will be much less so.
It is estimated that improper Medicare and Medicaid payments alone cost the government $54 billion in 2009. How much of the $54 billion was due to fraud as opposed to incompetence or mismanagement is unclear. A pilot program run in Texas, California, and New York did provide some encouragement that there was something to the administration's claim. They were able to recover $900 million in fraudulent claims from 2005-2008. However the fact that over $900 million was spent on fraudulent claims in just three states does little to reassure that the government will manage a federal health care plan effectively.
It is encouraging that the administration has chosen to get tough on fraud and waste. But given the prevalence fraud and waste in government, one has to suspect its ability. In the 2010 budget, only $140 million was identified as waste out of $3.6 trillion appropriated. There is certainly much more. No figure was given to the amount expected to be lost through fraud. The government rarely budgets for fraud.
The main problem with trying to ferret out waste is the assumption that waste is something distinct from the system. The truth is, waste is part of the system. According to the Heritage Foundation, there was $72 billion in improper payouts in 2008. That money was either paid to the wrong people or spent for the wrong reasons. Another $25 billion was spent to maintain vacant property owned by the government. $13 billion was either lost or stolen in Iraq. Fraud related to Hurricane Katrina cost another $2 billion. The GAO identified $202 billion in DOD cost overruns. The size of the federal government, the scores of agencies and bureaus, the tangle of regulations, and the vast number of employees ensure there will be redundancy, waste, and error. Bureaus are not machines and employees are not computers.
Human nature being what it is, it is inevitable that somewhere along the line money is going to be intercepted and misappropriated. It is to be expected that some people will try to avail themselves of the money offered by misrepresenting themselves or their circumstances. Some of those people are very good at it. A cumbersome bureaucracy with abundant money to spend and an opportunistic society is a recipe for fraud. One can change rules and systems, but one cannot change people. That is why there will always be people who rob banks.
The federal government has long demonstrated its inability to curb waste and fraud. The health care system in the U.S. is already riddled with it. From contractor fraud and insurance fraud to welfare fraud, there are always going to be people looking to take advantage of a situation. At least private insurance companies have an incentive to curb false and erroneous claims and cut waste. They want to make a profit. The government does not have to make a profit and so its incentives to save money will be far less compelling. A billion dollar federal health care plan can expect to lose untold tens, if not hundreds of millions of dollars in waste and fraud every year. You can tinker with agencies and regulations, but you cannot tinker with human nature.
If health care reform is enacted, the amount of waste and corruption in health care will only increase. Perhaps every two years or so we will hear campaign promises to ferret out waste and curb corruption. But it is unlikely there will be any more success in rooting in out than we experience now. If anything, there will be less. The FBI will not be investigating health care fraud. Nor will it examine the books. Accountants and bureaucrats will. And trusting Congress to curb waste would be futile.
If Obama succeeds in getting his plan passed, it better work as well as he claims. Otherwise, not only will the nation's health care suffer, but its bank account will be pilfered. The government may be able to do something to lessen the costs of fraud. But it will not be able to get rid of it. It is part of human nature. Neither will it be able to do much about waste and inefficiency. Those are part of government's nature. Nevertheless, work should be done to keep it pruned. I can only hope that Obama's promise was not really a threat that he intends to ignore fraud and waste if his bill is not passed. Government waste and fraud should be pursued vigorously regardless of whether health care reform is passed.
It is estimated that improper Medicare and Medicaid payments alone cost the government $54 billion in 2009. How much of the $54 billion was due to fraud as opposed to incompetence or mismanagement is unclear. A pilot program run in Texas, California, and New York did provide some encouragement that there was something to the administration's claim. They were able to recover $900 million in fraudulent claims from 2005-2008. However the fact that over $900 million was spent on fraudulent claims in just three states does little to reassure that the government will manage a federal health care plan effectively.
It is encouraging that the administration has chosen to get tough on fraud and waste. But given the prevalence fraud and waste in government, one has to suspect its ability. In the 2010 budget, only $140 million was identified as waste out of $3.6 trillion appropriated. There is certainly much more. No figure was given to the amount expected to be lost through fraud. The government rarely budgets for fraud.
The main problem with trying to ferret out waste is the assumption that waste is something distinct from the system. The truth is, waste is part of the system. According to the Heritage Foundation, there was $72 billion in improper payouts in 2008. That money was either paid to the wrong people or spent for the wrong reasons. Another $25 billion was spent to maintain vacant property owned by the government. $13 billion was either lost or stolen in Iraq. Fraud related to Hurricane Katrina cost another $2 billion. The GAO identified $202 billion in DOD cost overruns. The size of the federal government, the scores of agencies and bureaus, the tangle of regulations, and the vast number of employees ensure there will be redundancy, waste, and error. Bureaus are not machines and employees are not computers.
Human nature being what it is, it is inevitable that somewhere along the line money is going to be intercepted and misappropriated. It is to be expected that some people will try to avail themselves of the money offered by misrepresenting themselves or their circumstances. Some of those people are very good at it. A cumbersome bureaucracy with abundant money to spend and an opportunistic society is a recipe for fraud. One can change rules and systems, but one cannot change people. That is why there will always be people who rob banks.
The federal government has long demonstrated its inability to curb waste and fraud. The health care system in the U.S. is already riddled with it. From contractor fraud and insurance fraud to welfare fraud, there are always going to be people looking to take advantage of a situation. At least private insurance companies have an incentive to curb false and erroneous claims and cut waste. They want to make a profit. The government does not have to make a profit and so its incentives to save money will be far less compelling. A billion dollar federal health care plan can expect to lose untold tens, if not hundreds of millions of dollars in waste and fraud every year. You can tinker with agencies and regulations, but you cannot tinker with human nature.
If health care reform is enacted, the amount of waste and corruption in health care will only increase. Perhaps every two years or so we will hear campaign promises to ferret out waste and curb corruption. But it is unlikely there will be any more success in rooting in out than we experience now. If anything, there will be less. The FBI will not be investigating health care fraud. Nor will it examine the books. Accountants and bureaucrats will. And trusting Congress to curb waste would be futile.
If Obama succeeds in getting his plan passed, it better work as well as he claims. Otherwise, not only will the nation's health care suffer, but its bank account will be pilfered. The government may be able to do something to lessen the costs of fraud. But it will not be able to get rid of it. It is part of human nature. Neither will it be able to do much about waste and inefficiency. Those are part of government's nature. Nevertheless, work should be done to keep it pruned. I can only hope that Obama's promise was not really a threat that he intends to ignore fraud and waste if his bill is not passed. Government waste and fraud should be pursued vigorously regardless of whether health care reform is passed.
Monday, March 8, 2010
Results May Vary
When the stimulus bill was passed, it was heralded by many as an important and vital program to help those struggling in the economy. It would make it easier for those without work to get some and for those down on their luck to survive the drought. It was the plight of the unemployed and the struggling that spurred Obama and Congress to take action. So, how is that going?
Last fall, North Texas received $25 million in stimulus funds to help the homeless and those on the verge of homelessness. Only about $2 million of that has been spent. The small amount spent has nothing to do with the lack of applicants for those funds. It has to do with government management. It is not unusual for applicants to have to wait several weeks to get an appointment. This is attributed by some to the lack of staff needed to process the paper work along with the large numbers of people filing for assistance. Others attribute at least part of the problem to difficulties with the computer system used to process the claims. Curiously, while some claim the difficulties have to do with the unanticipated number of applicants, others worry that not enough people are aware of the program or now how to apply for assistance. "There is a lot of money that people don't know they could access" said an official working for one of the programs administering the funds.
Like for all federal programs, the application process is laborious. Applicants must first have an interview to determine eligibility. Next, they must provide documentation of income, or lack thereof, as well as housing status. Those without an income are not eligible for the program. The program only provides help with rent and utilities, not mortgages or other bills. Those seeking help with mortgages and bills are referred to another office for assistance where they have to start all over again. Presumably there are some signs posted on the wall to that effect. One applicant groused that he had called several agencies before he finally got an appointment. At that appointment he was told he was ineligible for that particular program because he did not have a job. He applied had to the wrong agency. Others seeking aid found out it would take a month to get an appointment just to apply for the aid. If they were approved for aid, it would take up to four months more to receive it. No doubt there is a story for every applicant.
When federal programs are enacted, they are announced with fanfare. The public is told of the great needs that program will meet and what a benefit it will be to society. The program will feed the hungry, shelter the poor, assist the struggling, ameliorate some crisis or another, and provide succor for those in need. Chances are statistics will be laid out such as how much money has been appropriated and how many people it is expected will be helped and how much they will be helped. Politicians will make speeches and take credit for the hard work they put in to provide that relief. Interest groups will issue press releases where they too will take credit for working to get the program enacted and laud the help that program will provide. Government will be able to move on to the next issue. Society will be able to relax and get on about its business comfortable in knowing that the less fortunate are being tended to.
However, it is those in need of that program that have to endure it. They are the ones who experience its true effects. The measure of a federal or state program is not the money budgeted, the number of offices and employees, or the mission statement. The true measure of a program is how it affects those who must rely upon it. It is the ones standing in line and filling out the forms that are best able to speak to the efficacy of a program. It is the ones who must meet the stipulations and bear the burdens that come with that aid that are best able to testify to its merits. If you want to know how successful or effective a program is, do not speak with the politicians who crafted it or the lobbyists who supported it. They do not rely upon those programs. Speak with the people who do.
Last fall, North Texas received $25 million in stimulus funds to help the homeless and those on the verge of homelessness. Only about $2 million of that has been spent. The small amount spent has nothing to do with the lack of applicants for those funds. It has to do with government management. It is not unusual for applicants to have to wait several weeks to get an appointment. This is attributed by some to the lack of staff needed to process the paper work along with the large numbers of people filing for assistance. Others attribute at least part of the problem to difficulties with the computer system used to process the claims. Curiously, while some claim the difficulties have to do with the unanticipated number of applicants, others worry that not enough people are aware of the program or now how to apply for assistance. "There is a lot of money that people don't know they could access" said an official working for one of the programs administering the funds.
Like for all federal programs, the application process is laborious. Applicants must first have an interview to determine eligibility. Next, they must provide documentation of income, or lack thereof, as well as housing status. Those without an income are not eligible for the program. The program only provides help with rent and utilities, not mortgages or other bills. Those seeking help with mortgages and bills are referred to another office for assistance where they have to start all over again. Presumably there are some signs posted on the wall to that effect. One applicant groused that he had called several agencies before he finally got an appointment. At that appointment he was told he was ineligible for that particular program because he did not have a job. He applied had to the wrong agency. Others seeking aid found out it would take a month to get an appointment just to apply for the aid. If they were approved for aid, it would take up to four months more to receive it. No doubt there is a story for every applicant.
When federal programs are enacted, they are announced with fanfare. The public is told of the great needs that program will meet and what a benefit it will be to society. The program will feed the hungry, shelter the poor, assist the struggling, ameliorate some crisis or another, and provide succor for those in need. Chances are statistics will be laid out such as how much money has been appropriated and how many people it is expected will be helped and how much they will be helped. Politicians will make speeches and take credit for the hard work they put in to provide that relief. Interest groups will issue press releases where they too will take credit for working to get the program enacted and laud the help that program will provide. Government will be able to move on to the next issue. Society will be able to relax and get on about its business comfortable in knowing that the less fortunate are being tended to.
However, it is those in need of that program that have to endure it. They are the ones who experience its true effects. The measure of a federal or state program is not the money budgeted, the number of offices and employees, or the mission statement. The true measure of a program is how it affects those who must rely upon it. It is the ones standing in line and filling out the forms that are best able to speak to the efficacy of a program. It is the ones who must meet the stipulations and bear the burdens that come with that aid that are best able to testify to its merits. If you want to know how successful or effective a program is, do not speak with the politicians who crafted it or the lobbyists who supported it. They do not rely upon those programs. Speak with the people who do.
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