Medicaid Should Be Included in Paul Ryan’s Anti-Poverty Proposal

Congressman Paul Ryan has introduced a proposal, Expanding Opportunity in America, to bring together different federal anti-poverty programs into one. Ryan focuses on the Earned Income Tax Credit, housing and home-energy assistance, education assistance, food stamps (SNAP), and criminal sentencing reform.

Ryan’s proposal hinges on the Opportunity Grant (OG). States would apply for OGs that would roll some or all of this federal money into one lump sum. However, it would not just be turned over to states as a block grant. States, civil-society organizations, and recipients themselves would all be responsible for measuring and achieving outcomes. The OG would have one overriding goal: To facilitate recipients moving out of dependency and into self-reliance.

Ryan is looking back to the success of the 1996 welfare reform, signed by a reluctant President Clinton after a successful campaign by House Speaker Newt Gingrich. Ten years after the reform, it was widely recognized as a significant success. (In 2012, President Obama gutted much of the reform through executive action.)

At a recent briefing at the American Enterprise Institute, Ron Haskins of the Brookings Institution pointed out that this proposal should have bipartisan appeal, and if it got to President Obama’s desk he would likely sign it. This explains the appeal of Ryan’s proposals. He doesn’t just throw out wide-eyed ideas designed to attract media attention. He develops them and modifies them until they get enough support from his colleagues that a pathway to success can be identified.

This is what happened to his Medicare reform proposal. The initial version, contained in his Roadmap, proved bait for demagoguery. President Obama accused him of wanting to give seniors “some kind of voucher,” insinuating that it would be about as valuable as a supermarket coupon. Most Republican colleagues were terrified of having to vote for this. Nevertheless, after some watering down, Ryan put it in his budget and convinced his colleagues to vote for it.

Ryan’s Medicare proposal shows that he understands health care. His new anti-poverty plan would benefit greatly from including Medicaid and the Children’s Health Insurance Plan (CHIP).

According to the left-leaning Center on Budget and Policy Priorities (CBPP), federal spending on Medicaid and CHIP amounted to $274 billion in 2013. Safety-net programs, including the EITC, Child Tax Credit, SNAP, housing assistance, assistance in paying home-energy bills, and other supports, added up to $398 billion. So, Medicaid and CHIP amount to over 41 percent of all safety net spending. And that was before the Medicaid expansion embedded in Obamacare, which launched in 2014 and aims to make millions more dependent on the federal government on health care.

There are a number of reasons why Ryan’s proposal would be more likely to succeed at raising people out of poverty if it included Medicaid and CHIP.

First, one of the major problems with the federal safety net is that it traps people in poverty due to income-tax “cliffs”. That is, when low-income people increase their incomes beyond cut-offs, they lose benefits. This imposes extremely high marginal-income tax rates, dissuading people from increasing their incomes.

Ryan’s Figure 3 clearly shows that there is a very high marginal-income tax rate imposed at an income between about $20,000 and $30,000. His Figure 2 shows that this is largely due to the complete elimination of Medicaid benefits. Any attempt to eliminate this poverty trap that ignores Medicaid is likely to fail.

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Second, excluding Medicaid from the proposal does not allow states to take into account the social determinants of health. Most scholars believe that the healthcare “system” accounts for maybe one quarter, and likely not more than one half, of a person’s health status. Things like unemployment or family life are independent factors. Ryan’s proposal recognizes this in other contexts:

The OG program will also be more responsive to different needs. For example, it makes little sense to provide a household with a consistent stream of SNAP benefits when what the household may need most is reliable transportation to and from work. Giving providers this kind of flexibility will allow them to intervene early on with targeted benefits in cases where short-term assistance can prevent someone from falling into deeper poverty.

That is well and good. However, what about providing transportation to and from medical appointments, too? Bundling Medicaid into an OG would give rise to creative opportunities to keep people healthy.

Third, bringing Medicaid into an OG program would dramatically improve politicians’ and bureaucrats’ incentives. Currently, every incentive drives them to increase dependency on Medicaid. Indeed, official statistics count Medicaid recipients among the insured, just like people who buy their own insurance or get it as an employer-based benefit. So, politicians can always increase the number of insured by expanding Medicaid. Current statistics barely recognize Medicaid as welfare. Ryan’s proposal would reward politicians and bureaucrats based on measurements that include “the number or percentage of people who find work” and “the number or percentage of people who get off assistance.”

Ryan’s Expanding Opportunity would be a great step forward for the federal safety net. Including Medicaid would dramatically improve its likelihood of success at freeing people to lift themselves out of poverty.

 

Comments (16)

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  1. Perry says:

    The State of New York is currently experimenting with providing housing for the chronically ill under Medicaid funding. There is no doubt that poor housing contributes to poor health and poor medical followup. It seems Mr Ryan’s proposal would account for this and allow the flexibility to do so according to each person/family needs.
    Sounds like a good approach to me.

  2. Thomas says:

    I think if Medicaid was included in his plan, it would have more bipartisan appeal. This is something that could be agreed upon and passed. It’s also something that can make a huge difference for poverty-stricken individuals.

  3. Kenneth A. Fisher says:

    Expanding Medicaid per say is expanding poor care as documented in Oregon. Instead use the Mitch Daniel’s plan of HSAs & HDHP for the poor in this case via state block grants.

  4. James M. says:

    “Ryan’s Figure 3 clearly shows that there is a very high marginal-income tax rate imposed at an income between about $20,000 and $30,000. His Figure 2 shows that this is largely due to the complete elimination of Medicaid benefits.”

    This is a good thing to point out. People who are stuck in poverty will be trapped due to their loss of benefits as they earn more. These high marginal income tax cliffs are disincentives from potentially earning more.

  5. Matthew says:

    It sounds like Ryan’s plan will troubleshoot any barriers that keep people in poverty.

    “For example, it makes little sense to provide a household with a consistent stream of SNAP benefits when what the household may need most is reliable transportation to and from work.”

    This is very interesting and out of the box.

  6. Bill B. says:

    “Ryan’s proposal would reward politicians and bureaucrats based on measurements that include “the number or percentage of people who find work” and “the number or percentage of people who get off assistance.”

    I think getting off assistance is the metric that should be measured. At least, getting off assistance because they can care for themselves. Hopefully this doesn’t provide incentive for people to be kicked off of assistance or provided part time jobs in an effort to improve the numbers.

    • Steve says:

      I agree Bill. Accurate and representative metrics are key to reform of any kind, and Ryan’s plan is a great start because it goes a long way towards addressing incentives. And incentives matter tremendously.

  7. Frank says:

    I’m not aware of the specifics but I hope this bill opens dialogue on ways that we can reform the government’s welfare system.

    • John R. Graham says:

      He doesn’t have a bill yet – just a proposal and an invitation to propose further recommendations. I hope this article helps.

  8. Flyover Country American says:

    Escaping the poverty trap is absolutely critical to reducing poverty. So why don’t more politicians focus on it?

    Paul Ryan’s plan actually does, and it work. The marginal tax rate cliffs that he points out are the real trap, and they need to be eliminated in order to people to see real gains from working.

    A lack of real work is what is plaguing our economy right now, and we need economic growth. That starts with people getting a productive job. Current incentives dissuade lower income people from doing this.

  9. charlie bond says:

    Good morning,
    For over half a decade we have been working on “the social determinants of health.” Gawande’s article in the New Yorker, entitled Hot Spotters, singled out Dr. Jeff Brenner’s work in Camden, N.J. Rebecca Ohne’s TED talk on her organization Health Leads is also inspiring.
    The fact is that we have to address health care as a local, community activity. Not only do we have to take care of ourselves, we have to organize voluntarism and community activism to address our neighbors’ health needs, which are quite often tied to other social needs.
    Some readers might characterize this approach as “liberal.” Quite to the contrary: It is non-governmental, local, voluntary and free enterprise. It draws on the deepest and best instincts of all Americans–to take care of ourselves and look after our neighbors.
    Folks interested in such an approach should feel free to contact me at cb@patientphysicianalliance.org.
    Cheers,
    Charlie Bond

    • John R. Graham says:

      Thank you. In the original version of the article (before chopping out a couple of hundred words), I anticipated conservative and libertarian blow-back.

      There’s a lot of hokum out there about midnight-basketball leagues cutting down on youth crime or eating healthier school meals resulting in better learning. So, it is easy for our side to criticize how that leads to big government.

      Nevertheless, social determinants of health are real.

  10. Robert A. Hall says:

    Doesn’t matter, it’s not going anywhere anyway. The Democrat poverty pimps and program bureaucrats would never let Harry Reid bring it to the floor or Obama sign it. Poverty is their rice bowl, and they will fight tooth and nail to keep the dollars flowing into the current system. The rest o us will hardly notice the fight. I will link to this from my Old Jarhead blog. (www.tartanmarine.blogspot.com)

    Robert A. Hall
    USMC 1964-68
    USMCR, 1977-83
    Massachusetts Senate, 1973-83
    Author: The Coming Collapse of the American Republic
    All royalties go to help wounded veterans
    For a free PDF of my 80-page book, write tartanmarine(at)gmail.com

  11. Wanda J. Jones says:

    John: Thank you; We have to encourage this. As to housing, the proven concept of co-housing sets up conditions that foster positive health, family life and community. Grants should be given to organizations that work with whole pockets of people, not just individuals or single families. Lots of behaviors are culturally-based. And, I’m all for special projects that aim at gangs, domestic violence, and sex trafficking.

    What I would like to see states do is profile their vulnerable populations on a web site that can be accessed by all service agencies. The question would be which populations will they address and why…

    In Marin County alone, there are over 400 health-related agencies. When there is a large source of funding, in this case, the Marin Community Foundation, agencies proliferate, so it would be necessary to stimulate collaboration and amalgamation.

    Good topic///let’s follow this proposal. Send a link so we can contribute to Ryan’s work…

    WJJ

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