A Grimmer State of the States

A Grimmer State of the States

Bob Pollin: New study shows states are paying more for medicaid as workers lose jobs with insurance; no help in sight from federal government -   December 17, 2012
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Robert Pollin is professor of economics at the University of Massachusetts Amherst. He is the founding co-director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.


A Grimmer State of the StatesPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The PERI Report with Bob Pollin, who now joins us from Amherst, Massachusetts. Bob is the cofounder and codirector of the PERI institute.

Thanks for joining us again, Bob.


JAY: So what are you following this week?

POLLIN: Okay. So a very interesting set of studies about conditions in state and local government finances. That is, we have started to see some improvement in state and local revenues. That is, their tax revenues are going up, getting to the point at which they're close to where they were in 2007 before the recession.

At the same time, however, their costs, in particular their health care costs that they have to bear through Medicaid, especially, have been rising very rapidly, and so that even though their revenues are going up, they're going to face increased--continued, ongoing, increased deficits because of this increase in their costs because of people who need health care who qualify for Medicaid.

Now, over the first phase of the recession, when we had the stimulus program, state and local government finances got bailed out by federal government revenue sharing, including my own institution here, University of Massachusetts. To date there is nothing in any federal program and there is no talk in the fiscal cliff about giving state and local governments more funding, more support. Quite the reverse. The idea is that state and local governments are not going to get a dime from the federal government through the agreement that goes into place with the onset of the fiscal cliff, so that state and local governments are going to remain strapped and they aren't going to have any backstop.

So that means the kinds of cuts that we have seen for education, for teachers, for public safety, for health care other than Medicaid, those things are going to have to continue to get cut unless there is more federal spending. So, again, the state and local government situation is going to be getting more and more severe, even though we've got this short respite with revenues going up.

JAY: Now, is this partly because more people are on Medicaid 'cause they've lost jobs that had insurance connected to them?

POLLIN: Yeah, there's two things going on. Number one, of course, people have lost their jobs. People have fallen below the threshold that qualifies them, because their incomes have gone down, their family incomes have gone down. And we're talking about five years now. So population has just gone up over that five years. We can't maintain a given level of revenue when population is going up, so that the combination means that the gap between what the government is getting in revenue, the state and local governments, and what they need to cover to help people that qualify for Medicaid, that gap is growing.

Now, what is the real answer here? The real answer is, of course, that the United States still spends grotesquely--grotesque amounts more than other countries on health care, and we get worse results. So that's really at the bottom of the issue. And until we squeeze out the $1 trillion or so in our health care system that goes to administrative costs, that goes to pharmaceutical companies, that has no equivalence in other Western countries that are paying half as much per person--. For example, the United States pays about $8,000 per person on health care. Germany, France spend about $4,000, Canada spends about $4,000, Japan spends about $3,000, and they get better outcomes in terms of life expectancy and overall measures of care. And the reason is we're wasting about $1 trillion on the administrative system, the private insurance system, and the pharmaceutical system, and excessive numbers of expensive tests. All of those contribute to the ongoing long-term crisis in health care. And we're not going to solve it until we confront those things.

JAY: And I guess if you're going to talk about grotesque expenditure compared to the rest of the world, I guess you cannot ignore military expenditure as well as the states and cities get into deeper crisis. The one thing that's sure to come out of the fiscal cliff negotiations is that they're going to make sure the military cuts are not as serious as might be triggered.

POLLIN: Right. Well, that certainly has been established. I mean, officially, on January 1, military spending gets cut equal to the amount of social spending. But there really isn't an equivalence here, because the military budget now, at 4.7 percent of GDP versus 3 percent of GDP in 2000 has grown by about $300 billion. And you could say, well, that was 'cause we had to fight two wars, Afghanistan and Iraq. Well, we're not fighting those wars anymore, so it makes perfect sense that at the very least we bring the military budget down from 4.7 to 3 percent of GDP, that is, we squeeze out that $300 billion or so, whereas in the case of social spending, again, we're not getting better health care, we've laid off teachers, we've laid off public safety workers, and therefore the money needs to go back into those areas, not into the military.

At the same time, what the real scuttlebutt in Washington is: in reality, they're not really going to end up cutting the military. That's the first priority. They've got some wording in the language of the fiscal cliff agreement which allows these spending cuts to shift disproportionately over to social spending as opposed to military spending.

JAY: Thanks for joining us, Bob.

POLLIN: Thank you very much for having me, Paul.

JAY: And thanks for joining us on The Real News Network. Don't forget we're just about at our target of the matching grant campaign. There's a Donate button over here. Thanks for joining us on The Real News Network.


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