What Is The Federal Government's Most Disastrous Program?

I know you are thinking that the question is impossible to answer because there are just too many to choose from.  So I'll give you some criteria:  to be considered as the "most disastrous program," a program must (1) cost a staggering amount of money, (2) accomplish next to nothing, and (3) be permeated by vast amounts of fraud.  On these criteria, the winner by thousands of miles has to be Medicaid.  Of course, given that the socialist/progressive response to failure is always to double down, we are in the midst of a huge expansion of Medicaid as part of Obamacare.

The staggering cost of Medicaid is undeniable.  Final 2016 spending numbers are not yet in, but the federal Medicaid budget for 2016 was about $345 billion.   Throw in a couple of hundred bil  for the state share of Medicaid spending, and you get to around $550 billion total.  That's enough to notice!  And spending on this program continues to explode, as it has exploded more or less continuously since inception in 1965.  As recently as 2014, total spending on Medicaid (federal + state) was only $476 billion, per the Kaiser Family Foundation.   First year expenditures in 1965 were about $1 billion.  OK, in inflation-adjusted dollars that would be more like $8 billion.  It's still more than six doublings of spending over 49 years, for a compound annual growth rate in constant dollars of around 9%.  Whew!

But surely, Medicaid accomplishes something -- doesn't it?  That depends what you are measuring, and how you measure.  I would suggest that there are two appropriate criteria to consider as to whether Medicaid accomplishes anything:  improvement in numbers of people in poverty, and improvement in health outcomes.  On those criteria, Medicaid is a spectacular disaster.

Consider the effect of Medicaid on numbers of people in poverty.  That is a highly appropriate criterion to consider, because Medicaid is billed as an "anti-poverty" program.  Indeed, Medicaid is far and away the largest "anti-poverty" program, consuming about half, or a little more, of the $1+ trillion of total federal + state + local anti-poverty spending in the U.S. each year.  It would be rather ridiculous, wouldn't it, to have a massive trillion-dollar annual budget for alleviating poverty, and spend fully half of it on a program that doesn't reduce poverty at all?  Yes, it would be completely ridiculous.  And of course, that's exactly what we do.  In the official measurement of "poverty," in-kind spending like Medicaid does not count.  The Census number crunchers measure "poverty" only based on what they call "cash income," and nothing about Medicaid counts as cash income.  Thus, Medicaid does not reduce the number of people in official "poverty" by a single soul.

If you think that's ridiculous, I have something even more so.  Recognizing the vulnerability of Medicaid to the criticism made here, some defenders of the program a few years ago felt a need to do a study to show that Medicaid actually does reduce poverty.  So in 2013, researchers named Sommers and Oellerich did a big study published in the Journal of Health Economics purporting to apply a sophisticated new methodology to evaluate whether Medicaid actually reduced poverty.  Of course the first thing their new methodology had to do was to avoid use of the regular Census methodology for measuring poverty, because it's a given that Medicaid does not and cannot reduce poverty under that definition.  (Instead they used the "new Coke" Supplemental Poverty measurement that Census had just come up with.  This is the definition of "poverty" now used by all good progressive advocates whenever the traditional measure gives the wrong answer.)  I won't go through all of Sommers & Oellerich's methodology (you can find a more detailed description at the link), but I'll cut to the breathless answer:  "Medicaid kept at least 2.6 million Americans out of poverty in 2010."  Exciting!  The result gets cited repeatedly in the progressive world, for example here by the Center for Budget and Policy Priorities in 2015.  

Really???  $400 billion (approximate 2010 spending level) to keep 2.6 million people out of poverty?  That's around $160,000 of spending per person relieved from poverty!  And this in a world where the official "poverty level" is under $12,000 for an individual, and around $6000 per person in larger families.  If the goal here, or any part of it, is to reduce poverty, it would be literally impossible to design a less cost-effective method even if you set out intentionally to do just that.  Medicaid is the perfect illustration of progressives treating the federal government as the infinite source of free money, without any concept of real costs or trade-offs.

But at least Medicaid must improve health outcomes, right?  Don't bet on it.  For decades literally everybody just assumed that having healthcare "coverage" must somehow improve health outcomes.  Then came the randomized study out of Oregon, published in the New England Journal of Medicine in 2013.  Result:

This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.   

After this, the best the defenders of Medicaid could say was basically, two years of data are not enough.  (But if heart attacks, or strokes, or diabetes, or other such things were actually going untreated among the uninsured, why wouldn't that turn up as at least somewhat increased mortality within two years?) Anyway, Oren Cass, in an article for the Manhattan Institute in June, points out that now longer term data are available, and the results haven't changed:

Critics of the [Oregon] study claim that two years isn't long enough for positive effects to materialize. But a longer-term statistical analysis published earlier this year found no significant correlation between health-care access and life expectancy for low-income households across different geographies.

So, on what measures is it even possible to try to defend the staggering expenditures on Medicaid?  Well, here's an article from the Huffington Post from July 27, written by Edwin Park of CBPP.  Park gives 10 reasons why Medicaid, supposedly, "works."  Not one of them has anything to do with either reducing poverty or improving health outcomes!  So what the hell are they?  Number one is "provid[ing] quality health coverage."  Number two is "cut[ting] dramatically the number of Americans without health insurance."  (Aren't those two the same thing?)  Number three is "Medicaid participation is high."  (Same thing again!)  Number four is "Medicaid has improved access to care . . . ."  (Same thing yet again!)  And so forth.  You get the idea:  "coverage" is the Holy Grail, even if it costs a bloody fortune without achieving any measurable improvements in either poverty or health outcomes.  Maybe this would make a little sense if the cost was $10 billion per year, or even $50 billion, or maybe even $100 billion.  But $550 billion per year???  

Oh, and let's not forget about the fraud.  Kevin Williamson has a post up on this subject at National Review Online, titled "The Facts about Medicaid Fraud."  I'm not sure he's got his facts perfect, but here is the key quote:

In September, the Department of Health and Human Services sent out a warning that improper payments under Medicaid have become so common that they will account this year for almost 12 percent of total Medicaid spending — just shy of $140 billion.

The $140 billion would be more like 25% of Medicaid spending than 12%, so I'm assuming that he must  be including Medicare as well.  Whatever.  Even at half the $140 billion level, the number is breathtaking.  And this is what the government admits to.  You could not go wrong betting that the real number is far higher than what they admit.

Medicaid is just the classic case of designing a program by feel-gooderism without any consideration of cost-effectiveness.  Once in place, it grows on auto-pilot, without anybody looking at it or considering whether the tens of billions of dollars of added spending every year are accomplishing anything meaningful.  Entrenched interests grow rich, while alternative uses of the money -- whether alternative government spending or returning the money to the private sector through tax cuts -- get pushed off the agenda.  

Have you noticed any mention by either side of the presidential campaign of the need to look at Medicaid for cost-effectiveness?  Neither have I.