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Posted at 12:33 PM ET, 02/22/2011

Why do unions care about Medicaid?

By Ezra Klein

Jon Cohn looks at the Medicaid section of Wisconsin Gov. Scott Walker's "budget-repair bill":

Under Walker’s proposal for Medicaid, his Secretary of Health could use “emergency” powers to redefine some of the program’s most basic parameters: Whom it enrolls, what premiums and co-payments [it] charges, etc. Normally, these sorts of decisions would require assent of the full legislature. But, according to Jon Peacock of the Wisconsin Council on Children and Families, under Walker’s proposal the Secretary of Health would need approval only from a joint legislative committee whose membership is heavily tilted towards the majority party. (The Center has more information about the proposal at its website.)

Because Medicaid is a federal-state partnership, federal guidelines do impose some limits on what Wisconsin could do. The state could not, for example, stop offering coverage to children. And in order for Walker’s change to take effect, I gather, the federal government would have to issue a waiver. Typically the feds issue waivers only when states show they can improve or bolster coverage, not when they are looking to weaken it. But Walker’s budget effectively puts a gun to Washington’s head: If the state doesn’t get permission to change the program in the way he wants, under Walker’s proposal, it would simply reduce Medicaid to the bare minimum permissible under federal law.

This is the exact sort of proposal that unions tend to fight. Why? It's hard to say. Relatively few of their members are on Medicaid. The whole point of being in a union, on some level, is that you don't have to be on Medicaid. But unions have this odd notion of "solidarity." So whenever Medicaid cuts end up on the agenda, you'll find the labor movement is the only well-funded, mass-membership lobby throwing its shoulders into the fight to save Medicaid.

This is the role that unions play that some of my conservative friends are missing. Megan McArdle, for instance, asks, "In what way do public sector unions act as a check on the power of corporations?" You can find one of the answers in Walker's agenda. Corporations aren't lobbying against Medicaid, of course. But they're lobbying for massive corporate tax cuts. And they look likely to get them (in fact, they've already gotten some). But the hundreds of millions of dollars or billions of dollars that those tax cuts add to the deficit will have to be made up somewhere. And Medicaid is a likely target. There is no one behind Medicaid with even an ounce of the political power that the business community wields.

No one, that is, except unions. And unions also happen to be the only organized interest group standing in opposition to continual tax cuts for corporations and the wealthy. This is why this fight is so important to both sides. If it were just about the money, it would be easier to resolve. But it's not just about money. And it's not, as McArdle goes on to suggest, about "some extra benefits for the teachers' unions." After all, the unions have already offered to make the concessions on benefits that Walker has asked for. Rather, this is about the balance of political power in Wisconsin and, given the potential for other governors to adopt Walker's proposal, nationally. It's about whether there will be anyone left to speak up next time a state with a yawning deficit proposes to give corporations a massive tax break while slashing Medicaid benefits. And that matters.

By Ezra Klein  | February 22, 2011; 12:33 PM ET
 
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Comments

For several years I taught courses at a community college in a program designed to train unemployed parents for re-entry into the workplace. I was continually amazed at the generosity my students displayed toward one another. These students had little themselves but they were quick to pitch in to help someone else, e.g., lending money to a student who couldn’t afford her medicine, volunteering to pick up a student whose car had broken down, helping each other with childcare, giving gifts to celebrate special occasions, . . ..

Union members can imagine themselves without jobs and needing medical care for their children; they know elderly and disabled people who need the nursing home care provided by Medicaid. (The bulk of Medicaid spending is for the poor elderly and disabled.)

Too many citizens have forgotten the lessons of our history and the exploitation of workers that took place prior to the introduction of unions in the workplace. And too many citizens view our representative governments as benign employers, forgetting that these representatives bring their biases with them to the office. I heard a speaker on the radio yesterday espousing that state workers had signed up to be public servants. Unfortunately I think his emphasis was on “servants.”

Posted by: HealthcareAnnotator | February 22, 2011 2:33 PM | Report abuse

Last week, we learned that Congressional Republicans were correct when they estimated significant increases in IRS staffing costs due to the PPACA. Today, we learn that the same Republican lawmakers were correct when they called the CLASS portion of the PPACA unsustainable.

In a report (at http://www.nytimes.com/2011/02/22/health/policy/22care.html) citied in today's Wonkbook, we read that "Administration officials, who played down such concerns 15 months ago, say they now share them. Under questioning by a Republican at a Senate hearing last week, Ms. Sebelius said the original version of the program, known as Community Living Assistance Services and Supports, or Class, was 'totally unsustainable.' She told the House Ways and Means Committee, 'We very much share the concerns that have been expressed that, as written into law, the framework of the program was not sustainable.'"

But today we also learn that Republican lawmakers were correct in yet another assessment of the PPACA: that the Obama/Pelosi PPACA gives unelected, unaccountable bureaucrats the ability to deny care to the weakest members of society, all under the guise of fiscal management. From the cited report, we read that HHS Secretary Sebelius "is considering changes to make the program 'significantly different than the framework that the law itself describes'."

Why would we want any unelected, unaccountable party spending taxpayer dollars in a manner which is 'significantly different than the framework that the law itself describes'? Certainly, the Obama/Pelosi PPACA wasn't intended to be a means of terminating the role of the legislative and judicial brances of government: certainly, those who voted for the PPACA did not wish to create an American dictatorship. Or did they?

As Klein has stated, it's all about the power. In Wisconsin, we see the democratically-elected government of a Sovereign State bullied by a union of its own employees -- employees who are also voters. In Louisianna, we have seen a Sovereign State government bullied by a federal president determined to punish his opponents despite the rule of law. In Arizona, we have seen a Sovereign State government bullied by federal powers who wish the law was something that it is not. We've seen a majority of the Sovereign States, representing a majority of the nation's citizens, react against the over-reaching and unconstitutional Obama/Pelosi PPACA. Soon, we're likely to see a now-impotent federal president lash out at the nation's elderly population, holding the wages these defenseless workers have paid into the Social Security System as ransom until the democratically-elected majority succumbs to petty dictates.

I hope that we're not seeing the end of democracy: if unions prevail against the elected, we have lost our nation.

Posted by: rmgregory | February 22, 2011 2:35 PM | Report abuse

"if unions prevail against the elected, we have lost our nation."

--This message has been sponsored by the Koch Foundation. The Koch Foundation: your friends, bankrolling the shock-doctrine treatment of the United States.

Posted by: pseudonymousinnc | February 22, 2011 2:42 PM | Report abuse

Damn straight. I have my problems with organized labor but they're the only major organized group standing up for the interests of working class Americans - and, increasingly, middle class Americans as well. The financial concessions Walker is asking might be justifiable. The attempts to effectively gut collective bargaining agreements are not.

Posted by: weiwentg | February 22, 2011 2:43 PM | Report abuse

Mr. Klein, let me lead you in a logical thought process, as this might help you understand something about corporate income taxes and who actually pays them (here's the answer--it's you).

Let's assume I make toys. I have to ship those toys to stores. I have to pay shipping costs. If the price of gas increases, then I am going to have to charge more for my toys to cover the higher cost of the gas. So will my competitors. We all have to pay shipping costs, thus we all have to deal with higher gas prices. The store in turn charges higher prices for the toys, because they have to pay more to buy the toys. At the end of the day, the higher gas price is paid by the consumer. You. All toys cost a little more because a universal cost factor of toy production increased. The toy maker and the store pass the cost on, because there is no market competitor who can undercut their prices--everyone has to buy gas to ship their toys.

Guess what? Corporate income taxes are the same thing. They are, just like gas, a cost of doing business that is universal. If you double corporate income taxes, you are not making companies "pay their fair share," you are just increasing your own tax burden, but hiding the increase in the price of all the goods and services you consume.

Try memorizing this sentence: CORPORATE INCOME TAXES ARE A REGRESSIVE TAX ON THE POOR--THEY RAISE PRICES FOR THE END CONSUMER WITHOUT REGARD TO HOUSEHOLD INCOME.

Either refute this argument or stop spewing nonsense about why corporate income tax rates are about the balance of power between the "haves" and the "have nots."

Posted by: Bipper | February 22, 2011 3:05 PM | Report abuse

So, just to make sure I have this straight Ezra....handing some control of Wisconsin's Medicaid program over to the state Sec of Health is completely wrong because it would take power from 'the people', and all those decisions/changes should remain with the full legislature?

But, in the PPACA, it's ok on a federal level to turn a broad swathe of new regulatory powers over to the unelected Secretary of the HHS and not run anything through Congress?

It appears liberals love establishing czars to rule by fiat when they run the executive branch, but when the GOP takes over the executive office cries erupt from the left to transfer all power and control back to the legislative branch....

Posted by: dbw1 | February 22, 2011 3:25 PM | Report abuse

"And in order for Walker’s change to take effect, I gather, the federal government would have to issue a waiver.

But Walker’s budget effectively puts a gun to Washington’s head: If the state doesn’t get permission to change the program in the way he wants, under Walker’s proposal, it would simply reduce Medicaid to the bare minimum permissible under federal law.
"


That doesn't make sense. Why would Walker's changes need federal approval to go merely up to the minimum permissible coverage?

How exactly does Medicaid, a problem that bankrupts the states and adds to the deficit more than any other, continue to grow like a weed without such political support?

Posted by: krazen1211 | February 22, 2011 3:48 PM | Report abuse

@dbw

Absolutely! You really owned the leftists.

I think Ezra and company are really desperate to say something positive about the unions, so they're just throwing out stuff.

Usually he is much better about checking his content.

Posted by: krazen1211 | February 22, 2011 3:53 PM | Report abuse

"CORPORATE INCOME TAXES ARE A REGRESSIVE TAX ON THE POOR--THEY RAISE PRICES FOR THE END CONSUMER WITHOUT REGARD TO HOUSEHOLD INCOME."

Taxation of a corporation's profits is not "just like gas, a cost of doing business." Putting this theory in all caps doesn't make it true.

If the owners or shareholders of a corporation have a marginal tax rate increase, management in rare instances might decide to increase prices, or they might accept the reality of a lower after-tax profit, or (most likely) they'll continue to do what corporations traditionally do at all times, which is work to keep the profit "pie" growing (by expansion and diversification of their products and services, improving their reputation for quality and value, and generating more effective marketing and sales).

Taxing profit is not a "cost of doing business" (like material costs or shipping expenses). The notion that if we cut corporate taxes we will see a sudden universal corresponding deflation in the pricing of all of their products is naive and not borne out by real world experience.

Posted by: Patrick_M | February 22, 2011 3:59 PM | Report abuse

This effort to curtail Medicaid cuts at the state level by unions may be a regional thing. Out in our area (blue state), there hasn't been much public opposition by unions to already implemented and proposed cutbacks in state government funding for social programs and federal-state programs like Medicaid. Of course public may be a relative term. They may oppose the intent of the cutback proposals but it's not like the massive numbers of people marching on the streets in Wisconsin. On the other hand, the outcry over our governor's attempt to require retired public workers to pay a portion of their Medicare premium and warning about projected retirement fund deficits were front page news.

Posted by: tuber | February 22, 2011 5:50 PM | Report abuse

"It appears liberals love establishing czars to rule by fiat when they run the executive branch, but when the GOP takes over the executive office cries erupt from the left to transfer all power and control back to the legislative branch...."

You try to tell them that their team isn't always going to be running the show, and that someone with far different priorities will apply the same principles against them, but it simply doesn't sink in.

Posted by: justin84 | February 22, 2011 6:07 PM | Report abuse

Ezra- You ask why unions oppose cuts in Medicaid even though few (if any) union members receive Medicaid. It's simple: a large number of health care workers (i'm thinking nurses and home health workers) are unionized and cuts in Medicaid could reduce employment and/or salaries among unionized workers. They don't want to take a pay cut or lose their job. Nothing wrong with that, but they don't oppose Medicaid cuts out of pure altruism.

Posted by: MBP2 | February 22, 2011 6:20 PM | Report abuse

Remember that the majority of Medicaid spending is on the elderly and disabled, not for people in poverty. Link

Posted by: JeffLevin-Scherz | February 22, 2011 8:27 PM | Report abuse

I dont feel like i should be forced to have health insurance, I think everyone would like to have health insurance if they could afford it. If you need affordable health insurance search online "Wise Health Insurance" you dont want to be with out insurance any time.

Posted by: gonzamunz | February 23, 2011 4:48 AM | Report abuse

Patrick_M:

Taxes are not a cost of doing business? Really? Then it makes no difference whether the tax rate is 90% or 10%? You actually believe that businesses simply accept higher taxes by bearing the cost internally?

Tax on profits is a "cost" of doing business in the practical (if not the accounting) sense because profit is reduced by the amount of tax. In the real world, if it reduces profit, it’s a cost, regardless of at what point in the accounting process the reduction in profit is taken.

You said companies respond to higher corporate income taxes not by raising prices but by:

1. "accept[ing] the reality of a lower after-tax profit"--this makes no sense at all. The same general tax issues affect all similarly situated businesses. Thus there is no reason not to pass on the cost to the consumer via a higher price. There is no competitive disadvantage to raising prices when a cost factor in universal. There is a very real legal limit to the efficiency one can achieve through sophisticated tax compliance strategies.

2. "(most likely) they'll continue to do what corporations traditionally do at all times, which is work to keep the profit "pie" growing (by expansion and diversification of their products and services, improving their reputation for quality and value, and generating more effective marketing and sales)." This is just another way of saying that they will take the hit without responding by raising prices. As you point out, they already operate their business with a goal of making money and will keep doing so. This doesn't change the fact that their cost of doing business has increased and the after-tax profit they would have made was reduced. If they can offset that loss they will.


Also, please note that I did not say there was a 1:1 tax rate to price correlation. Doubling the corporate tax rate does not double the price of a given product, just the share of its price attributable to tax burden. Thus, doubling the corporate tax rate (a 100% increase) might result in only a 1% price increase--it all depends on the business and product at issue.

Posted by: Bipper | February 23, 2011 10:12 AM | Report abuse

they care because it means jobs for their members - for example, the unions got the California to pass minimum nurse staffing levels (at tremendous expense) so more nurses were hired.

Cuts in medicaid mean fewer jobs for the unionized care providers.

Posted by: timInCT | February 23, 2011 11:06 AM | Report abuse

Also, I think Megan has the better of the argument:
http://www.theatlantic.com/business/archive/2011/02/unions-and-medicaid/71586/

Posted by: timInCT | February 23, 2011 11:08 AM | Report abuse

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