HuffPost

Kentucky Just Made It Harder For Poor People To Get Health Care

It’s what the Trump administration wants — and more states will likely follow.

By Johnathan Cohn, Senior Correspondent, HuffPost     January 12, 2018

The Trump administration on Friday told Kentucky it can go ahead with its controversial Medicaid overhaul ― an initiative that would reduce benefits, require some beneficiaries to work, and generally make it more difficult for people to stay on the program.

Administration officials and their Kentucky counterparts have portrayed the plan as a way to improve the health of low-income residents and encourage self-sufficiency among poor but able-bodied adults. “The result will be a transformational improvement in the overall health of our people and will provide a model for other states to follow,” Matt Bevin, the state’s Republican governor, said at a press conference Friday.

But there’s scant evidence that Kentucky’s changes will have the effects that Bevin and his allies are promising. In fact, of the roughly 95,000 people expected to lose coverage, some will almost surely be people who are working ― or have reasons why they can’t work ― but who failed to satisfy the new system’s paperwork requirements.

Almost by definition, the people likely to lose coverage already have some combination of financial and medical problems, and without coverage, both are likely to get worse. It’s not clear how much this worries Bevin and his allies in Washington ― or whether it worries them at all.

In the new scheme, most working-age adults in Kentucky would have to demonstrate that they have spent at least 80 hours a month working or engaged in employment-related activities, like searching for a job or performing community service. Many would also have to pay premiums, of up to $15 a month.

Anyone who does not pay their premiums or submit paperwork to show their eligibility would lose their coverage and would not be able to reapply for six months, although people who don’t pay premiums could restore coverage by completing a financial literacy course (the details of which aren’t yet clear).

The Kentucky initiative also eliminates a transportation benefit, designed to get poor people to the doctor or hospital when they don’t have the means to do so. And it ends “presumptive” or “retroactive” eligibility, under which Medicaid covers bills from the past three months for people who sign up for Medicaid only after they’ve had a medical episode that landed them in the hospital.

Kentucky’s proposal is likely to prompt legal challenges. If it survives, then the result will almost certainly be a smaller Medicaid program. Both the state and the federal government would likely end up spending less money than they would otherwise. But fewer people would be on Medicaid: The number of beneficiaries would drop by roughly 95,000 within five years, according to official state estimates.

By comparison, Kentucky’s total Medicaid enrollment ― including kids on the Children’s Health Insurance Program ― is about 1.25 million right now, according to official statistics.

In theory, the new requirements would not affect children, the elderly, pregnant women, primary caregivers or the “medically frail,” because Kentucky’s proposal explicitly exempts them. But those categories are narrower than they might seem, experts warned Friday as they pored over the final proposal and checked it against previous versions. (Every analyst studying it has warned that their conclusions are still a little tentative.)

“Medically frail,” for example, doesn’t appear to include people with serious chronic diseases that make jobs difficult to find and keep. And the new paperwork requirements will be difficult for some people to satisfy ― because they can’t get the right documentation, for example, or because overwhelmed state offices won’t be responsive to questions.

As a result, some people who remain eligible for Medicaid will almost surely end up losing coverage anyway. It’s happened that way before, when states introduced work requirements for food stamps and straightforward cash assistance.

“The policy could allow many people to fall through the cracks, including those with chronic health conditions, and those with mental health or substance use disorders such as opioid addiction,” Hanna Katch, a senior analyst at the Center on Budget and Policy Priorities, told HuffPost. “And for those who are eligible for an exemption, the policy could still require someone who is medically frail, for example, to jump through administrative hoops to demonstrate that they are eligible for an exemption.”

Kentucky isn’t the only state that wants to impose these kinds of restrictions on Medicaid. Nearly a dozen states have similar requests sitting in Washington, awaiting approval from the Trump administration that they’re almost certain to get. More could follow soon.

Friday’s approval of Kentucky’s new plan came one day after the Trump administration announced it would approve work requirements. This represented a considerable policy shift. Previously, the Obama administration had rejected such requests, arguing that work requirements violate Medicaid’s guarantee of health care for poor people. These are the same arguments that advocates for the poor are likely to make if and when they sue to block the changes.

Trump administration officials, like their Kentucky counterparts, know this. In their letter approving the proposal, they previewed their defense by making the same argument they did on Thursday ― that requiring able-bodied Medicaid recipients to work would improve their health outcomes and help them become familiar with the way private health insurance works. That is why, the administration said, it was within its rights to approve Kentucky’s request as a “demonstration project.”

But there’s very little evidence to suggest Kentucky’s overhaul will improve health outcomes, and quite a lot of evidence to suggest it will actually worsen them. Multiple studies, some of them focusing on Kentucky specifically, have shown that giving people Medicaid makes them healthier and more financially secure, which in turn makes it easier for them to find and hold on to jobs.

There is also little reason to think these changes would make Kentucky’s Medicaid program more efficient. On the contrary, new requirements such as checking to make sure people have jobs will inevitably require more administrative work ― not just for the people who want Medicaid, but for the state government as well.

Retroactive eligibility ― a key if underappreciated provision of Medicaid in most states ― doesn’t simply help low-income people avoid crippling medical debt. It also helps finance the operation of safety net hospitals. Ending it, as Kentucky plans to do, would likely hurt both. When another state, Indiana, experimented with having Medicaid recipients contribute toward the cost of their Medicaid, large numbers did not, and they ended up losing coverage as a result.

Those are just some of the reasons to think the real motivation for these changes has little to do with health outcomes, efficiency or the economy as a whole. A more plausible explanation is that Republican officials ― including Bevins and Seema Verma, the Trump administration official in charge of Medicaid ― think too many able-bodied adults are on the program. In fact, Verma has said this explicitly before.

Many Americans ― quite possibly most ― would have no problem linking Medicaid and work. But nearly 80 percent of people on Medicaid are already in families where somebody is employed, and nearly 60 percent work themselves, according to data from the Henry J. Kaiser Family Foundation. And of those who don’t work, most are in school or caring for a family member, or have a medical condition that they say prevents them from working. Other studies have yielded similar findings.

That all of this should be happening in Kentucky is ironic. Although a relatively conservative state, smack in the heart of what now qualifies as Trump country, Kentucky enthusiastically embraced the Affordable Care Act when it became law. It took advantage of new federal money to expand its Medicaid program, so it would be available to all people with incomes below or just above the poverty line.

Between 2013 and 2016, the share of Kentucky’s residents without insurance fell from 20.4 percent to 7.8 percent. That was the single biggest drop of any state in the country.

But that change took place while Steve Beshear, a Democratic governor enthusiastic about helping poor people get health insurance, was in charge. Bevins, his successor and a loud critic of “Obamacare,” campaigned on a promise to roll back the expansion. Although he backed off that promise ― perhaps because many of those who supported him would have been among the hundreds of thousands losing coverage ― he has continued to suggest Medicaid needs radical changes because, he says, it encourages dependency.

Bevin has also made a threat that if he can’t get his way on the work requirement and other changes, he will go ahead and roll back the expansion after all. That would leave a much larger number of Kentucky residents, perhaps approaching half a million, without health insurance.

Washington Post

Home Depot just showed who will gain the most from corporate tax cuts

By David Lynch      December 7, 2017

With unemployment low and demand for new homes high, a company like Home Depot could be spending most of its surplus billions on raises for workers or the rollout of new stores.

Instead, the world’s largest home improvement chain this week announced that it is using $15 billion to buy back shares of its own stock, a move that will reward shareholders including chief executive Craig Menear and other top executives.

Even as lawmakers on Capitol Hill began hammering out the final version of a tax cut designed to give businesses more money to invest, Home Depot’s statement was a reminder that corporate America may have other plans for that cash.

Several companies already have indicated that they will use excess funds to pay off debt, increase dividend payments or repurchase their own shares rather than create new jobs or raise wages. On Wall Street, the consensus is that workers will be last in line behind shareholders, creditors and investment bankers when the extra corporate cash is distributed.

“If they’ve got good growth prospects for something, they’re already throwing money at that. I don’t think the world changes because of lower taxes,” said Tim Ghriskey, who manages $1.5 billion in assets as chief investment officer at Solaris Asset Management. “There’s clearly going to be a lot of share buybacks.”

Home Depot, which says its plans have nothing to do with the shifting tax landscape, is a special company for the president. The chain’s founder, Bernie Marcus, was among President Trump’s staunchest supporters during the 2016 campaign, once writing that “the fate of this nation” depended upon his election.

Now, the White House website features a Marcus opinion piece praising the tax cut as “the gift that keeps on giving.” As Congress debated the $1.5 trillion Republican tax plan, Home Depot last month issued a statement praising the plan for “improving the competitive position of companies so they can create more jobs.”

White House economists have said that more generous tax rules for corporations will lead to an increase in investment, which will in turn trigger more jobs and higher wages. In an October report, the Council of Economic Advisers bemoaned the “disappointing state of capital accumulation” and said underinvestment by big business explains disappointing wage growth in recent years.

Yet business investment by one measure has risen in four of the past five quarters, which economists say is a reminder that such big-ticket spending decisions often turn on more than the tax rate. Some outside experts also are skeptical that the tax changes will make much difference for companies already enjoying ­near-record corporate profits.

“I don’t anticipate much new investment,” said economist Dean Baker of the Center for Economic and Policy Research.

To be sure, several corporations, including AT&T and CVS Health, have publicly touted plans to funnel tax savings into new spending on equipment or hiring. The telecom giant has vowed to boost its annual investment next year by $1 billion, about a 4 percent increase from last year’s $22 billion total.

Companies choose to buy their own shares, increase the dividend they pay shareholders, or pay off debt when they can’t earn a higher return by using the money some other way. With interest rates so low, letting cash sit idle doesn’t make sense.

“Companies have had so much cash, they could do ‘all of the above.’ They’re likely to continue to do so,” said Edward Yardeni, president and chief investment strategist at Yardeni Research.

Over the past five years, companies in the Standard & Poor’s 500-stock index spent $2.6 trillion acquiring their own shares. Information technology companies such as Google’s parent company Alphabet led the way with big banks such as Wells Fargo and Citigroup close behind. Dozens of companies so far this year, including marquee names such as Apple, JPMorgan Chase and Boeing, have spent big on their own stock.

As the stock market shattered records this year, the number of companies in the S&P 500 that have repurchased shares fell compared with last year.

With the corporate tax cut nearing final approval, Home Depot is far from alone in its buyback plans. Within hours of the retailer’s announcement Wednesday, T-Mobile US disclosed its own $1.5 billion plan to repurchase shares.

Such buybacks often lift stock prices, since they result in the same earnings being divided by a smaller number of shares. In Home Depot’s case, that will be good news for shareholders that include top management, a teachers pension plan and mutual funds run by Capital Group, Vanguard and BlackRock.

Home Depot also is increasing its investment, modernizing the front end of its top 40 stores and introducing more automation to its supply chain. Over the next three years, the company plans to spend $8.2 billion on capital improvements compared with more than $27 billion on share buybacks and dividends.

The retailer’s announcement, which included no major hiring, was just the latest indication that the $1.5 trillion tax cut may not have the intended effect upon corporate investment and the overall economy.

With extra cash freed up by the corporate tax cuts, buybacks could top the record value of $172 billion set in the third quarter of 2007. Around $129 billion was spent in the most recent three months, according to S&P Dow Jones Indices.

“I definitely think it’s going up,” said Howard Silverblatt, senior analyst at S&P Dow Jones Indices.

In a July survey of 302 companies, 65 percent said they planned to boost dividend payments, and 46 percent forecast share buybacks. A little more than one-third said they would invest the proceeds in new equipment, according to Bank of America Merrill Lynch.

House and Senate conferees are working to reconcile competing tax cut packages in hopes of sending Trump a final bill before Christmas. The measure would cut the corporate income tax to 20 percent from the current 35 percent and allow companies to bring home roughly $2.6 trillion in cash parked overseas at sharply reduced tax rates.

Home Depot had $4.2 billion deposited in foreign accounts as of January, according to its Securities and Exchange Commission filings.

A spokesman for Home Depot said the tax legislation was not a consideration in the stock buyback or the unveiling of new financial targets for 2020, including a modest increase in capital spending.

“Tax reform benefit is not factored into any of this,” Stephen Holmes said.

The disappointing prospects for corporate investment echo prior tax-cutting episodes. In 2004, the U.S. granted companies a one-time opportunity to bring money home and pay a 5.25 percent tax rather than the full 35 percent corporate levy. Almost all of the repatriated funds were distributed to shareholders, according to a 2009 study by economists at Harvard University, the Massachusetts Institute of Technology and the University of Illinois.

“We’ve been down this road before and come up relatively empty-handed,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “You can give these companies more money, but if they don’t have any way to invest the money and get the return they want, they’re going to return the money to shareholders every single time.”

David J. Lynch is a staff writer on the financial desk who joined the Post in November 2017 after working for the Financial Times, Bloomberg News and USA TODAY.