Lee Elci: All right, here we go. Ladies and gentlemen, each and every Wednesday at the same time, we bring on national columnist, our friend Red Jahncke. Red, Good morning. How are you, sir?
Red Jahncke: Hey. Good morning Lee. How are you?
Lee Elci: I’m doing good, brother. So, I wanted to ask you, if you put in a hiring or wage freeze, how are you going to recruit new employees for the state of Connecticut?
Red Jahncke: Well, offer a signing bonus. It’s paid to maybe 1% of the employees who you hire. They’re 1% of the entire workforce. You don’t need to pay 50,000 state employees 4.5% more for an entire year.
Lee Elci: All right. I just wanted to get that out there. So, Red, let’s talk about this column. We had talked about this probably about a month or so ago, and it was jaw-dropping, to say the least. So, just give me the 30,000 foot view before we dive into your latest, “States Are Using Medicaid as a Slush Fund.”
Red Jahncke: Well, let’s hit the news headline today, which is the Big Beautiful Bill working its way through Congress as a very modest reform of these provider taxes. Namely, there’s a moratorium on increases and the installation of a new tax. Say you’re not yet taxing your nursing homes. Under the bill, if it passes into law, you will not be able to create a new tax in your state on nursing homes. You also cannot increase those taxes that you already have in place.
So what do we find out on Monday of this week, Ned Lamont huddled with the Democrat leaders in the General Assembly, and they announced together on Monday that they’re going to increase the tax to $375 million. Now, this tax has been at the level of $900 million since 2017. This state is going to increase the tax $375 million on top of $900 in the teeth of that proposed legislation.
Lee Elci: All right. So, why has Congress failed to address this? This scheme? It’s a scheme, right?
Red Jahncke: Yeah. Very few people know about it. So, the State of Connecticut taxes the hospitals $900 million. It immediately sends back anywhere from 600 to $750 million, right back to the hospitals. And the first thing you say to yourself is, why the 900 and why the 750? Why not just a net tax of $150 right? Right?
Lee Elci: Yeah.
Red Jahncke: Well, when the $750 goes back to the hospitals, it generates a federal Medicaid matching payment. At $600, it generates $450 million. So, the more you tax your hospitals, the more you can siphon out of Washington in matching funds. And that’s this game.
Lee Elci: And the hospitals are in on it. Right.
Red Jahncke: The hospitals are in on it. Let’s just do what happened in 2017. Malloy doubled the tax to $900 million. He sent $600 back to the hospitals. The state kept $300. The hospitals were out $300. The state got a match from Uncle Sam via the Medicaid program of $450 million. Daniel kept it, added it to the 300 he’d already kept and paid down the state budget deficit, a $2.2 billion deficit at in that year.
The $750 million didn’t go to health care. It went to close the budget deficit. So this state used Medicaid money to close its deficit, not to fund health care. That’s the kind of monkey business that’s been going on in this program. And, Connecticut is probably the worst perpetrator. It was identified in the Senate committee report as the worst perpetrator. But other states inevitably are doing some of this, but it’s also growing the Medicaid program dramatically.
Lee Elci: All right. Let’s do this one more time. Right. Because this is pretty important just to go over it one more time. I mean, if you don’t mind, step by step. So Connecticut taxes the hospitals $900 million. Doesn’t matter what they charged it. They could charge anything. But you’re you’re taxing them $900 million, presumably on the profit that they made. Is that correct?
Red Jahncke: It it’s $900 million on what’s called “net patient revenue.”
Lee Elci: Okay. So, then, the state of Connecticut gets that and then they they turn around and give back $700 mil. In what way do they give it back to the hospitals. Just they write them a check.
Red Jahncke: Cold hard cash.
Lee Elci: All right. So they give the hospitals back $700 million. So the state gets $200 million free. Then, the feds match what they gave back.
Red Jahncke: Right, right. When it goes back to the hospitals, it is labeled a supplemental Medicaid payment. It just acquires a label. Label triggers the federal match, which is probably a $500 million match in this state.
Lee Elci: All right. So then they get $500 million from the feds and use that for whatever they want.
Red Jahncke: For whatever they want.
Lee Elci: And every state is doing this.
Red Jahncke: Every state is doing this to some degree. Some states are doing it straight up honest. [Some] are playing real monkey business with this provider tax scheme?
Lee Elci: Is that what’s happening?
Red Jahncke: Yes. And here’s the reason no one knows about it. This is “regulated” (in quotes) by the Center for Medicare and Medicaid Services – CMS. So, so-called CMS does not collect data. CMS purposely does not collect the data on what the different states are doing individually or in aggregate, how much money is involved and what they’re spending it on. CMS has been criticized roundly in full reports by the Government Accountability Office in Washington in 2014 and in 2020, and in minor reports, several in the interim because they don’t collect any data.
No one knows what’s going on. Without information, you can’t identify waste, misuse and abuse. And without identifying misuse and abuse, you can’t hold anyone accountable or culpable. So this game goes on literally in the dark.
This is the best example to demonstrate how the deep state works. They know what’s going on. They’re involved day to day, but they don’t collect any data that would allow anyone else to know what’s going on. So, this is all a wink and a nod between CMS and all the various states. And of course, CMS is staffed by the likes of Bernie Sanders, who thinks health care should be available for free for everyone regardless of cost. It’s kind of a backdoor implementation of Bernie Sanders dream.
Lee Elci: If every state is doing it, I don’t think this can be policed by the state. It has to be policed by the feds because the states are going to keep doing this.
Red Jahncke: Yeah. I mean, if you can expand your state government, via, you know, siphoning these funds from Uncle Sam, why wouldn’t you? If you keep your taxes down by raising the money through this scheme, why wouldn’t you? If you believe in Bernie Sanders and free health care for everyone, regardless of cost, why wouldn’t you draw down these funds from Uncle Sam? Of course. It’s got to be regulated out of Washington.
Lee Elci: Wow. This is I mean. We talked about this a month ago, I couldn’t believe it. I can’t believe that this is not like huge, massive, we-must-deal-with-this-today news. I mean I keep going back to the word grift, but it does seem like it’s a big con game going on.
Red Jahncke: It is. You can use any one of those – grift, con, shell game. They’ve all been used. Siphoned out of the US Treasury to do with whatever you want.
Lee Elci: Why did the feds match this money?
Red Jahncke: Well, again, CMS is staffed with health care professionals. It’s it’s another instance of what is referred to as “regulatory capture.” You have regulators who are expert in an area they’re supposed to regulate an industry. They get in bed with the industry and they promote the industry.
What happened with Boeing and the FAA is another superb example. Boeing lured the FAA into such a cozy relationship that it convinced the FAA that Boeing itself could perform all the inspections and certify the airplanes as airworthy. It got to that point. They had captured the FAA completely. Only with the the scandal of the 737 Max did the the FAA wake up. Did public scrutiny wake the FAA up. And now the FAA is performing inspections with its own personnel and Boeing can no longer play this game. This is what’s going on at CMS. They’re all health care devotees. They all believe that health care is a human right, and they’re using this backdoor in-the-dark scheme to fund as much of health care as a human right as they can.
Lee Elci: I gotta go after this, but would we have a Medicaid problem if this this shell game didn’t exist?
Red Jahncke: Yes. As we discussed in our offline conversation a week or two ago. This state is relying upon the hospital tax for $900 million of revenue. Okay. And, yes, they send back seven. They keep two, but they get five there. The state itself is relying upon this for $700 million of revenue.
That’s almost as much as the entire corporate tax revenue in this state. If that were taken away, this state goes into cardiac arrest immediately.
But the real choice here: Is Uncle Sam is going into cardiac. It’s got angina as witnessed by Jamie Diamond saying we are going to have a crisis. He said “not if.” But he said sometime as soon as six months from now. This is the chairman and CEO of the largest bank in the country, one of the largest banks in the world. He’s been at the helm for decades. He knows what he’s talking about. He has reacted to current circumstance and this current bill, which blows up the deficit and blows up debt and said, we are going to have a crisis. So the choice in my mind is let’s sacrifice a state or two. Let’s throw one state or another into crisis. Better that than the nation. A state crisis we can survive as a nation. A national crisis, no. So it’s time to rein all of this in, so Uncle Sam can survive. If a particular state or two don’t survive, we can deal with that. But if the whole nation goes into crisis, all bets are off.
Lee Elci: Red, heavy stuff, man. We’ll pick it up a little bit more next time. But, I posted the column up on our threads. And of course, if you can’t find it there, you can go to the-red-line.com and read it for yourself.
Red. Thank you buddy. I got to run, but I’ll talk to you next time, I appreciate it.
Red Jahncke: All right. All right. I’ll see you.
Lee Elci: Later. Thank you. Brother.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.